Related papers: Multi-asset return risk measures

We review the recently introduced concept of variety of a financial portfolio and we sketch its importance for risk control purposes. The empirical behaviour of variety, correlation, exceedance correlation and asymmetry of the probability…

Let $\rho$ be a general law--invariant convex risk measure, for instance the average value at risk, and let $X$ be a financial loss, that is, a real random variable. In practice, either the true distribution $\mu$ of $X$ is unknown, or the…

Factor modeling of asset returns has been a dominant practice in investment science since the introduction of the Capital Asset Pricing Model (CAPM) and the Arbitrage Pricing Theory (APT). The factors, which account for the systematic risk,…

This paper proposes swaps on two important new measures of generalized variance, namely the maximum eigen-value and trace of the covariance matrix of the assets involved. We price these generalized variance swaps for financial markets with…

We revisit mean-risk portfolio selection in a one-period financial market where risk is quantified by a positively homogeneous risk measure $\rho$. We first show that under mild assumptions, the set of optimal portfolios for a fixed return…

This paper generalizes results concerning strong convexity of two-stage mean-risk models with linear recourse to distortion risk measures. Introducing the concept of (restricted) partial strong convexity, we conduct an in-depth analysis of…

Measuring and managing risk has become crucial in modern decision making under stochastic uncertainty. In two-stage stochastic programming, mean risk models are essentially defined by a parametric recourse problem and a quantification of…

In this paper, we consider a finite-horizon Markov decision process (MDP) for which the objective at each stage is to minimize a quantile-based risk measure (QBRM) of the sequence of future costs; we call the overall objective a dynamic…

Model risk measures consequences of choosing a model in a class of possible alternatives. We find analytical and simulated bounds for payoff functions on classes of plausible alternatives of a given discrete model. We measure the impact of…

In this paper, we consider a situation where a decision maker's (DM's) risk preference can be described by a spectral risk measure (SRM) but there is not a single SRM which can be used to represent the DM's preferences consistently.…

A semi-parametric joint Value-at-Risk (VaR) and Expected Shortfall (ES) forecasting framework employing multiple realized measures is developed. The proposed framework extends the realized exponential GARCH model to be semi-parametrically…

For a risk-averse finite-horizon Markov Decision Problem, we introduce a special class of Markov coherent risk measures, called mini-batch measures. We also define the class of multipattern risk-averse problems that generalizes the class of…

We extend the scope of risk measures for which backtesting models are available by proposing a multinomial backtesting method for general distortion risk measures. The method relies on a stratification and randomization of risk levels. We…

The project managers who deal with risk management are often faced with the difficult task of determining the relative importance of the various sources of risk that affect the project. This prioritisation is crucial to direct management…

We propose policy gradient algorithms which learn risk-sensitive policies in a reinforcement learning (RL) framework. Our proposed algorithms maximize the distortion risk measure (DRM) of the cumulative reward in an episodic Markov decision…

Optimization of distortion riskmetrics with distributional uncertainty has wide applications in finance and operations research. Distortion riskmetrics include many commonly applied risk measures and deviation measures, which are not…

This paper addresses the importance of incorporating various risk measures in portfolio management and proposes a dynamic hybrid portfolio optimization model that combines the spectral risk measure and the Value-at-Risk in the mean-variance…

Determining risk contributions of unit exposures to portfolio-wide economic capital is an important task in financial risk management. Computing risk contributions involves difficulties caused by rare-event simulations. In this study, we…

Different approaches to defining dynamic market risk measures are available in the literature. Most are focused or derived from probability theory, economic behavior or dynamic programming. Here, we propose an approach to define and…

In this paper, we consider the problem of equal risk pricing and hedging in which the fair price of an option is the price that exposes both sides of the contract to the same level of risk. Focusing for the first time on the context where…