Related papers: Hedging Extreme Co-Movements
The time dependence of the recently introduced minimum spanning tree description of correlations between stocks, called the ``asset tree'' have been studied to reflect the economic taxonomy. The nodes of the tree are identified with stocks…
Computation of extreme quantiles and tail-based risk measures using standard Monte Carlo simulation can be inefficient. A method to speed up computations is provided by importance sampling. We show that importance sampling algorithms,…
The cryptocurrency market is volatile, non-stationary and non-continuous. Together with liquid derivatives markets, this poses a unique opportunity to study risk management, especially the hedging of options, in a turbulent market. We study…
How to price and hedge claims on nontraded assets are becoming increasingly important matters in option pricing theory today. The most common practice to deal with these issues is to use another similar or "closely related" asset or index…
To draw inference on serial extremal dependence within heavy-tailed Markov chains, Drees, Segers and Warcho{\l} [Extremes (2015) 18, 369--402] proposed nonparametric estimators of the spectral tail process. The methodology can be extended…
We consider two different portfolios of proportional reinsurance of the same pool of risks. This contribution is concerned with Gaussian-like risks, which means that for large values the survival function of such risks is, up to a…
Discrete time hedging in a complete diffusion market is considered. The hedge portfolio is rebalanced when the absolute difference between delta of the hedge portfolio and the derivative contract reaches a threshold level. The rate of…
In situations where both extreme and non-extreme data are of interest, modelling the whole data set accurately is important. In a univariate framework, modelling the bulk and tail of a distribution has been extensively studied before.…
We develop an extreme value framework for CoVaR centered on $v(q \mid p ; C)$, the copula-adjusted probability level, or equivalently, the CoVaR on the uniform (0,1) scale. We characterize the possible tail regimes of $v(q \mid p ; C)$…
Based on suitable left-truncated or censored data, two flexible classes of $M$-estimations of Weibull tail coefficient are proposed with two additional parameters bounding the impact of extreme contamination. Asymptotic normality with…
We propose a mean functional which exists for any probability distributions, and which characterizes the Pareto distribution within the set of distributions with finite left endpoint. This is in sharp contrast to the mean excess plot which…
Extreme events are often multivariate in nature. A compound extreme occurs when a combination of variables jointly produces a significant impact, even if individual components are not necessarily marginally extreme. Compound extremes have…
We study the empirical version of halfspace depths with the objective of establishing a connection between the rates of convergence and the tail behaviour of the corresponding underlying distributions. The intricate interplay between the…
This paper addresses the problem of estimating the tail index of distributions with heavy, Pareto-type tails for dependent data, that is of interest in the areas of finance, insurance, environmental monitoring and teletraffic analysis. A…
Motivated by the prominence of Conditional Value-at-Risk (CVaR) as a measure for tail risk in settings affected by uncertainty, we develop a new formula for approximating CVaR based optimization objectives and their gradients from limited…
The role of portfolio construction in the implementation of equity market neutral factors is often underestimated. Taking the classical momentum strategy as an example, we show that one can significantly improve the main strategy's features…
The time proximity of trades across stocks reveals interesting topological structures of the equity market in the United States. In this article, we investigate how such concurrent cross-stock trading behaviors, which we denote as…
In complete markets, there are risky assets and a riskless asset. It is assumed that the riskless asset and the risky asset are traded continuously in time and that the market is frictionless. In this paper, we propose a new method for…
Correlations in complex systems are often obscured by nonstationarity, long-range memory, and heavy-tailed fluctuations, which limit the usefulness of traditional covariance-based analyses. To address these challenges, we construct scale…
Financial crises are a recurrent phenomenon with important effects on the real economy. The financial system is inherently fragile and it is therefore of great importance to be able to measure and characterize its systemic stability.…