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Jorion, Philippe - 2005

This paper provides an empirical analysis of the risk of trading revenues of U.S. commercial banks. We collect quarterly data on trading revenues, broken down by business line, as well as the Value at Risk-based market risk charge. The overall picture from these preliminary results is that there...

Persistent link: https://www.econbiz.de/10012467650

Financial Risk Measurement for Financial Risk Management

Andersen, Torben G. - 2012

Current practice largely follows restrictive approaches to market risk measurement, such as historical simulation or RiskMetrics. In contrast, we propose flexible methods that exploit recent developments in financial econometrics and are likely to produce more accurate risk assessments, treating...

Persistent link: https://www.econbiz.de/10012460575

International Asset Allocation with Time-Varying Correlations

Ang, Andrew - 1999

It is widely believed that correlations between international equity markets tend to increase in highly volatile bear markets. This has led some to doubt the benefits of international diversification. This article solves the dynamic portfolio choice problem of a US investor faced with a...

Persistent link: https://www.econbiz.de/10012471745

On Portfolio Optimization : Forecasting Covariances and Choosing the Risk Model

Chan, Louis K.C. - 1999

We evaluate the performance of different models for the covariance structure of stock returns, focusing on their use for optimal portfolio selection. Comparisons are based on forecasts of future covariances as well as the out-of-sample volatility of optimized portfolios from each model. A few...

Persistent link: https://www.econbiz.de/10012471761

On the Correlation Structure of Microstructure Noise : A Financial Economic Approach

Diebold, Francis X. - 2010

volatility estimation. In particular, we use market microstructure theory to derive the cross-correlation function between latent … returns and market microstructure noise, which feature prominently in the recent volatility literature. The cross-correlation … geometrically. If market makers are sufficiently risk averse, however, the cross-correlation pattern is inverted. Our results are …

Persistent link: https://www.econbiz.de/10012462188

Risk Reduction in Large Portfolios : Why Imposing the Wrong Constraints Helps

Jagannathan, Ravi - 2002

Mean-variance efficient portfolios constructed using sample moments often involve taking extreme long and short positions. Hence practitioners often impose portfolio weight constraints when constructing efficient portfolios. Green and Hollifield (1992) argue that the presence of a single...

Persistent link: https://www.econbiz.de/10012469792

The Cross-Section of Risk and Return

Daniel, Kent - 2017

In the finance literature, a common practice is to create factor-portfolios by sorting on characteristics (such as book-to-market, profitability or investment) associated with average returns. The goal of this exercise is to create a parsimonious set of factor-portfolios that explain the...

Persistent link: https://www.econbiz.de/10012453549

A Sharper Ratio : A General Measure for Correctly Ranking Non-Normal Investment Risks

Smetters, Kent - 2013

While the Sharpe ratio is still the dominant measure for ranking risky assets, a substantial effort has been made over the past three decades to find a way to account for non-Normally distributed risks. This paper derives a generalized ranking measure which, under a regularity condition,...

Persistent link: https://www.econbiz.de/10012459163

Nonparametric Risk Management and Implied Risk Aversion

Ait-Sahalia, Yacine - 2000

Typical value-at-risk (VAR) calculations involve the probabilities of extreme dollar losses, based on the statistical distributions of market prices. Such quantities do not account for the fact that the same dollar loss can have two very different economic valuations, depending on business...

Persistent link: https://www.econbiz.de/10012471198

Liquidity and Risk Management

Garleanu, Nicolae B. - 2007

This paper provides a model of the interaction between risk-management practices and market liquidity. On one hand, tighter risk management reduces the maximum position an institution can take, thus the amount of liquidity it can offer to the market. On the other hand, risk managers can take...

Persistent link: https://www.econbiz.de/10012465769

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