Related papers: Levy-stable scaling of risk and performance functi…
This paper proposes a semiparametric stochastic volatility (SV) model that relaxes the restrictive Gaussian assumption in both the return and volatility error terms, allowing them to follow flexible, nonparametric distributions with…
This paper studies a mean-risk portfolio choice problem for log-returns in a continuous-time, complete market. This is a growth-optimal problem with risk control. The risk of log-returns is measured by weighted Value-at-Risk (WVaR), which…
We study the stability of receding horizon control for continuous-time non-linear stochastic differential equations. We illustrate the results with a simulation example in which we employ receding horizon control to design an investment…
We account for time-varying parameters in the conditional expectile-based value at risk (EVaR) model. The EVaR downside risk is more sensitive to the magnitude of portfolio losses compared to the quantile-based value at risk (QVaR). Rather…
Multistable distributions, which have been introduced recently by Falconer, L\'evy V\'ehel and their co-authors, are natural generalizations of symmetric "alpha" stable distributions; roughly speaking, they are obtained by replacing the…
This paper investigates the hedging effectiveness of a dynamic moving window OLS hedging model, formed using wavelet decomposed time-series. The wavelet transform is applied to calculate the appropriate dynamic minimum-variance hedge ratio…
In a recent article the authors obtained a formula which relates explicitly the tail of risk neutral returns with the wing behavior of the Black Scholes implied volatility smile. In situations where precise tail asymptotics are unknown but…
A Bayesian analytics framework that precisely quantifies uncertainty offers a significant advance for financial risk management. We develop an integrated approach that consistently enhances the handling of risk in market volatility…
This paper introduces a flexible framework for the estimation of the conditional tail index of heavy tailed distributions. In this framework, the tail index is computed from an auxiliary linear regression model that facilitates estimation…
This paper solves the consumption-investment problem under Epstein-Zin preferences on a random horizon. In an incomplete market, we take the random horizon to be a stopping time adapted to the market filtration, generated by all observable,…
In this article, we first review the connection between L\'evy processes and infinitely divisible random variables, and the classification of infinitely divisible distributions. Using this connection and the L\'evy-Khinchine representation…
This work studies the dynamic risk management of the risk-neutral value of the potential credit losses on a portfolio of derivatives. Sensitivities-based hedging of such liability is sub-optimal because of bid-ask costs, pricing models…
We introduce a method to estimate simultaneously the tail and the threshold parameters of an extreme value regression model. This standard model finds its use in finance to assess the effect of market variables on extreme loss distributions…
The joint Value at Risk (VaR) and expected shortfall (ES) quantile regression model of Taylor (2017) is extended via incorporating a realized measure, to drive the tail risk dynamics, as a potentially more efficient driver than daily…
We introduce the anytime-valid (AV) logrank test, a version of the logrank test that provides type-I error guarantees under optional stopping and optional continuation. The test is sequential without the need to specify a maximum sample…
We use the martingale convergence method to get the weak convergence theorem on general functionals of partial sums of independent heavy-tailed random variables. The limiting process is the stochastic integral driven by $\alpha-$stable…
In this paper we introduce a new class of L\'evy processes which we call hypergeometric-stable L\'evy processes, because they are obtained from symmetric stable processes through several transformations and where the Gauss hypergeometric…
Consider power utility maximization of terminal wealth in a 1-dimensional continuous-time exponential Levy model with finite time horizon. We discretize the model by restricting portfolio adjustments to an equidistant discrete time grid.…
We study the statistical properties of helicity in direct numerical simulations of fully developed homogeneous and isotropic turbulence and in a class of turbulence shell models. We consider correlation functions based on combinations of…
We develop and justify methodology to consistently test for long-horizon return predictability based on realized variance. To accomplish this, we propose a parametric transaction-level model for the continuous-time log price process based…