Current practice largely follows restrictive approaches to market risk measurement, such as historical simulation or … produce more accurate risk assessments, treating both portfolio-level and asset-level analysis. Asset-level analysis is … particularly challenging because the demands of real-world risk management in financial institutions - in particular, real …

volatility estimation. In particular, we use market microstructure theory to derive the cross-correlation function between latent … geometrically. If market makers are sufficiently risk averse, however, the cross-correlation pattern is inverted. Our results are …

It depends. If volatility fluctuates in a forecastable way, then volatility forecasts are useful for risk management …; hence the interest in volatility forecastability in the risk management literature. Volatility forecastability, however … volatility forecastability decays quickly with horizon. Volatility forecastability, although clearly of relevance for risk …

expected exchange rate depreciations (appreciations) for high (low) interest rate currencies, suggesting that disaster risk is … priced in currency markets. To study the price of disaster risk, we propose a simple structural model that includes both … Gaussian and disaster risk and can be estimated even in samples that do not contain disasters. Estimating the model over the …

What do academics have to offer market risk management practitioners in financial institutions? Current industry … assessments of market risk. Clearly, the demands of real-world risk management in financial institutions -- in particular, real …-time risk tracking in very high-dimensional situations -- impose strict limits on model complexity. Hence we stress parsimonious …