Related papers: Expected Shortfall: a natural coherent alternative…
Capital allocation is a procedure for quantifying the contribution of each source of risk to aggregated risk. The gradient allocation rule, also known as the Euler principle, is a prevalent rule of capital allocation under which the…
This paper presents non-parametric estimates of spectral risk measures applied to long and short positions in 5 prominent equity futures contracts. It also compares these to estimates of two popular alternative measures, the Value-at-Risk…
Volatility, as a primary indicator of financial risk, forms the foundation of classical frameworks such as Markowitz's Portfolio Theory and the Efficient Market Hypothesis (EMH). However, its conventional use rests on assumptions-most…
We propose an $\ell_1$-penalized estimator for high-dimensional models of Expected Shortfall (ES). The estimator is obtained as the solution to a least-squares problem for an auxiliary dependent variable, which is defined as a…
Shortfall systemic (multivariate) risk measures $\rho$ defined through an $N$-dimensional multivariate utility function $U$ and random allocations can be represented as classical (one dimensional) shortfall risk measures associated to an…
We present a general framework for a comparative theory of variability measures, with a particular focus on the recently introduced one-parameter families of inter-Expected Shortfall differences and inter-expectile differences, that are…
Expected shortfall (ES), also known as conditional value-at-risk, is a widely recognized risk measure that complements value-at-risk by capturing tail-related risks more effectively. Compared with quantile regression, which has been…
Volatility is the canonical measure of financial risk, a role largely inherited from Modern Portfolio Theory. Yet, its universality rests on restrictive efficiency assumptions that render volatility, at best, an incomplete proxy for true…
This paper introduces a dynamic change of measure approach for computing the analytical solutions of expected future prices (and therefore, expected returns) of contingent claims over a finite horizon. The new approach constructs hybrid…
We study the feasibility and noise sensitivity of portfolio optimization under some downside risk measures (Value-at-Risk, Expected Shortfall, and semivariance) when they are estimated by fitting a parametric distribution on a finite sample…
We introduce a new regression method that relates the mean of an outcome variable to covariates, under the "adverse condition" that a distress variable falls in its tail. This allows to tailor classical mean regressions to adverse…
Given a universe of N assets, investors often form equally weighted portfolios (EWPs) by selecting subsets of assets. EWPs are simple, robust, and competitive out-of-sample, yet the uncertainty about which subset truly performs best is…
A joint conditional autoregressive expectile and Expected Shortfall framework is proposed. The framework is extended through incorporating a measurement equation which models the contemporaneous dependence between the realized measures and…
We study issues of robustness in the context of Quantitative Risk Management and Optimization. We develop a general methodology for determining whether a given risk measurement related optimization problem is robust, which we call…
We examine weak anticipations in discrete-time and continuous-time financial markets consisting of one risk-free asset and multiple risky assets, defining a minimal probability measure associated with the anticipation that does not depend…
The ongoing concern about systemic risk since the outburst of the global financial crisis has highlighted the need for risk measures at the level of sets of interconnected financial components, such as portfolios, institutions or members of…
We investigate entropy as a financial risk measure. Entropy explains the equity premium of securities and portfolios in a simpler way and, at the same time, with higher explanatory power than the beta parameter of the capital asset pricing…
We introduce a new actuarial tail-shape index, the $\theta$-index, based on a probability equal level relationship between Value at Risk and Expected Shortfall. The index is defined at each tail probability level as the parameter value for…
Expectile, as the minimizer of an asymmetric quadratic loss function, is a coherent risk measure and is helpful to use more information about the distribution of the considered risk. In this paper, we propose a new risk measure by replacing…
Extreme Value Theory (EVT) is one of the most commonly used approaches in finance for measuring the downside risk of investment portfolios, especially during financial crises. In this paper, we propose a novel approach based on EVT called…