Related papers: Expected Shortfall: a natural coherent alternative…

In the present contribution we characterize law determined convex risk measures that have convex level sets at the level of distributions. By relaxing the assumptions in Weber (2006), we show that these risk measures can be identified with…

Accounting for model uncertainty in risk management and option pricing leads to infinite dimensional optimization problems which are both analytically and numerically intractable. In this article we study when this hurdle can be overcome…

In structural credit risk models, default events and the ensuing losses are both derived from the asset values at maturity. Hence it is of utmost importance to choose a distribution for these asset values which is in accordance with…

We investigate the probability equivalent level of Value at Risk and $n^{\mathrm{th}}$-order Expected Shortfall (called PELVE_n), which can be considered as a variant of the notion of the probability equivalent level of Value at Risk and…

We study a non-concave optimization problem in which a financial company maximizes the expected utility of the surplus under a risk-based regulatory constraint. For this problem, we consider four different prevalent risk constraints…

Systemic risk refers to the risk that the financial system is susceptible to failures due to the characteristics of the system itself. The tremendous cost of systemic risk requires the design and implementation of tools for the efficient…

Managing a portfolio to a risk model can tilt the portfolio toward weaknesses of the model. As a result, the optimized portfolio acquires downside exposure to uncertainty in the model itself, what we call "second order risk." We propose a…

Expectiles are statistical parameters which also provide a class of sublinear risk measures in finance. They are solutions of continuous optimization problems. The corresponding first order condition provides two different fixed point…

A classical result in risk measure theory states that every coherent risk measure has a dual representation as the supremum of certain expected value over a risk envelope. We study this topic in more detail. The related issues include: 1.…

We investigate the portfolio frontier and risk premia in equilibrium when institutional investors aim to minimize the tracking error variance under an ESG score mandate. If a negative ESG premium is priced in the market, this mandate can…

The use of emergent constraints to quantify uncertainty for key policy relevant quantities such as Equilibrium Climate Sensitivity (ECS) has become increasingly widespread in recent years. Many researchers, however, claim that emergent…

We consider the problem of ESO valuation in continuous time. In particular, we consider models that assume that an appropriate random time serves as a proxy for anything that causes the ESO's holder to exercise the option early, namely,…

This study develops an inverse portfolio optimization framework for recovering latent investor preferences including risk aversion, transaction cost sensitivity, and ESG orientation from observed portfolio allocations. Using controlled…

The recent empirical work of Amaya et al. (2015) has pointed out that the realized skewness, which is the sample skewness of intraday high-frequency returns of a financial asset, serves as forecasting future returns in the cross-section.…

The expected regret and target semi-variance are two of the most important risk measures for downside risk. When the distribution of a loss is uncertain, and only partial information of the loss is known, their worst-case values play…

In this article, by using composite asymmetric least squares (CALS) and empirical likelihood, we propose a two-step procedure to estimate the conditional value at risk (VaR) and conditional expected shortfall (ES) for the GARCH series.…

Having reliable estimates of the occurrence rates of extreme events is highly important for insurance companies, government agencies and the general public. The rarity of an extreme event is typically expressed through its return period,…

In normal times, it is assumed that financial institutions operating in non-overlapping sectors have complementary and distinct outcomes, typically reflected in mostly uncorrelated outcomes and asset returns. Such is the reasoning behind…

In the last five years, expected shortfall (ES) and stressed ES (SES) have become key required regulatory measures of market risk in the banking sector, especially following events such as the global financial crisis. Thus, finding ways to…

We introduce the concept of partial law invariance, generalizing the concepts of law invariance and probabilistic sophistication widely used in decision theory, as well as statistical and financial applications. This new concept is…