Related papers: Worse fluctuation method for fast Value-at-Risk es…

We propose a fast algorithm for computing the economic capital, Value at Risk and Greeks in the Gaussian factor model. The algorithm proposed here is much faster than brute force Monte Carlo simulations or Fourier transform based methods…

Quantification of risk positions under model uncertainty is of crucial importance from both viewpoints of external regulation and internal management. The concept of model uncertainty, sometimes also referred to as model ambiguity. Although…

We introduce a faithful representation of the heavy tail multivariate distribution of asset returns, as parsimonous as the Gaussian framework. Using calculation techniques of functional integration and Feynman diagrams borrowed from…

Portfolio selection in the periodic investment of securities modeled by a multivariate Merton model with dependent jumps is considered. The optimization framework is designed to maximize expected terminal wealth when portfolio risk is…

Numerical challenges inherent in algorithms for computing worst Value-at-Risk in homogeneous portfolios are identified and solutions as well as words of warning concerning their implementation are provided. Furthermore, both conceptual and…

Risk assessment for rare events is essential for understanding systemic stability in complex systems. As rare events are typically highly correlated, it is important to study heavy-tailed multivariate distributions of the relevant…

Designing dynamic portfolio insurance strategies under market conditions switching between two or more regimes is a challenging task in financial economics. Recently, a promising approach employing the value-at-risk (VaR) measure to assign…

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…

This paper provides an insight to the time-varying dynamics of the shape of the distribution of financial return series by proposing an exponential weighted moving average model that jointly estimates volatility, skewness and kurtosis over…

We introduce a novel covariance estimator for portfolio selection that adapts to the non-stationary or persistent heteroskedastic environments of financial time series by employing exponentially weighted averages and nonlinearly shrinking…

In this paper we discuss a general methodology to compute the market risk measure over long time horizons and at extreme percentiles, which are the typical conditions needed for estimating Economic Capital. The proposed approach extends the…

We study mean-risk optimal portfolio problems where risk is measured by Recovery Average Value at Risk, a prominent example in the class of recovery risk measures. We establish existence results in the situation where the joint distribution…

We study the consistency of sample mean-variance portfolios of arbitrarily high dimension that are based on Bayesian or shrinkage estimation of the input parameters as well as weighted sampling. In an asymptotic setting where the number of…

We propose an iterative gradient-based algorithm to efficiently solve the portfolio selection problem with multiple spectral risk constraints. Since the conditional value at risk (CVaR) is a special case of the spectral risk measure, our…

In an environment of increasingly volatile financial markets, the accurate estimation of risk remains a major challenge. Traditional econometric models, such as GARCH and its variants, are based on assumptions that are often too rigid to…

Based on law of large numbers and central limit theorem under nonlinear expectation, we introduce a new method of using G-normal distribution to measure financial risks. Applying max-mean estimators and small windows method, we establish…

Reliable calculations of financial risk require that the fat-tailed nature of prices changes is included in risk measures. To this end, a non-Gaussian approach to financial risk management is presented, modeling the power-law tails of the…

Worst-case risk measures refer to the calculation of the largest value for risk measures when only partial information of the underlying distribution is available. For the popular risk measures such as Value-at-Risk (VaR) and Conditional…

Determining contributions by sub-portfolios or single exposures to portfolio-wide economic capital for credit risk is an important risk measurement task. Often economic capital is measured as Value-at-Risk (VaR) of the portfolio loss…

In the market place, diversification reduces risk and provides protection against extreme events by ensuring that one is not overly exposed to individual occurrences. We argue that diversification is best measured by characteristics of the…