Related papers: Forecasting Portfolio Risk in Normal and Stressed …

We consider the portfolio optimization with risk measured by conditional value-at-risk, based on the stress event of chosen asset being equal to the opposite of its value-at-risk level, under the normality assumption. Solvability conditions…

Individual risk models need to capture possible correlations as failing to do so typically results in an underestimation of extreme quantiles of the aggregate loss. Such dependence modelling is particularly important for managing credit…

In this article we deal with the problem of portfolio allocation by enhancing network theory tools. We use the dependence structure of the correlations network in constructing some well-known risk-based models in which the estimation of…

We address the problem of portfolio optimization under the simplest coherent risk measure, i.e. the expected shortfall. As it is well known, one can map this problem into a linear programming setting. For some values of the external…

We study a simple, solvable model that allows us to investigate effects of credit contagion on the default probability of individual firms, in both portfolios of firms and on an economy wide scale. While the effect of interactions may be…

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…

This paper describes a general approach for stochastic modeling of assets returns and liability cash-flows of a typical pensions insurer. On the asset side, we model the investment returns on equities and various classes of fixed-income…

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…

This paper studies a continuous-time market {under stochastic environment} where an agent, having specified an investment horizon and a target terminal mean return, seeks to minimize the variance of the return with multiple stocks and a…

In this paper, we are interested in evaluating the resilience of financial portfolios under extreme economic conditions. Therefore, we use empirical measures to characterize the transmission process of macroeconomic shocks to risk…

We show how one can actually take advantage of the strongly non-Gaussian nature of the fluctuations of financial assets to simplify the calculation of the Value-at-Risk of complex non linear portfolios. The resulting equations are not hard…

We model systemic risk using a common factor that accounts for market-wide shocks and a tail dependence factor that accounts for linkages among extreme stock returns. Specifically, our theoretical model allows for firm-specific impacts of…

In practice daily volatility of portfolio returns is transformed to longer holding periods by multiplying by the square-root of time which assumes that returns are not serially correlated. Under this assumption this procedure of scaling can…

Several studies have focused on the Realized Range Volatility, an estimator of the quadratic variation of financial prices, taking into account the impact of microstructure noise and jumps. However, none has considered direct modeling and…

It is commonly believed that the correlations between stock returns increase in high volatility periods. We investigate how much of these correlations can be explained within a simple non-Gaussian one-factor description with time…

We investigate financial market correlations using random matrix theory and principal component analysis. We use random matrix theory to demonstrate that correlation matrices of asset price changes contain structure that is incompatible…

We propose a portfolio approach for operational risk quantification based on a class of analytical models from which we derive new results on the correlation problem. In particular, we show that uniform correlation is a robust assumption…

Analytical, free of time consuming Monte Carlo simulations, framework for credit portfolio systematic risk metrics calculations is presented. Techniques are described that allow calculation of portfolio-level systematic risk measures…

Measurement and management of credit concentration risk is critical for banks and relevant for micro-prudential requirements. While several methods exist for measuring credit concentration risk within institutions, the systemic effect of…

We analyze correlations among stock returns via a series of widely adopted parameters which we refer to as explanatory variables. We subsequently exploit the results to propose a long only quantitative adaptive technique to construct a…