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Cash flow and discount rate risk in up and down markets : what is actually priced?

Botshekan, Mahmoud; Kräussl, Roman; Lucas, André - 2010

of cash flow versus discount rate news as in Campbell and Vuolteenaho (2004). We construct a new four-fold beta … that the downside cash flow beta and downside discount rate beta carry the largest premia. We subject our result to an …, periods, and return decomposition methods, and is the only component of beta that has significant out-of-sample predictive …

Persistent link: https://www.econbiz.de/10011382429

Choosing expected shortfall over VaR in Basel III using stochastic dominance

Chang, Chia-Lin; Jiménez-Martín, Juan-Ángel; … - 2015

Bank risk managers follow the Basel Committee on Banking Supervision (BCBS) recommendations that recently proposed shifting the quantitative risk metrics system from Value-at-Risk (VaR) to Expected Shortfall (ES). The Basel Committee on Banking Supervision (2013, p. 3) noted that: "a number of...

Persistent link: https://www.econbiz.de/10011431395

A stochastic dominance approach to the Basel III dilemma : expected shortfall or VaR?

Chang, Chia-Lin; Jiménez-Martín, Juan-Ángel; … - 2015

The Basel Committee on Banking Supervision (BCBS) (2013) recently proposed shifting the quantitative risk metrics system from Value-at-Risk (VaR) to Expected Shortfall (ES). The BCBS (2013) noted that - a number of weaknesses have been identified with using VaR for determining regulatory capital...

Persistent link: https://www.econbiz.de/10010532611

Dynamic correlations and optimal hedge ratios

Bos, Charles S.; Gould, Phillip - 2007

The focus of this article is using dynamic correlation models for the calculation of minimum variance hedge ratios between pairs of assets. Finding an optimal hedge requires not only knowledge of the variability of both assets, but also of the co-movement between the two assets. For this...

Persistent link: https://www.econbiz.de/10011372522

Investment, resolution of risk, and the role of affect

Winden, Frans A. A. M. van; Krawczyk, Michal; … - 2008

This experimental study is concerned with the impact of the timing of the resolution of risk onpeople's willingness to take risks, with a special focus on the role of affect. While the importanceof anticipatory emotions has so far been only inferred from decisions regarding hypothetical...

Persistent link: https://www.econbiz.de/10011374397

Down-side risk metrics as portfolio diversification strategies across the GFC

Allen, David E.; McAleer, Michael; Powell, Robert; … - 2015

This paper features an analysis of the effectiveness of a range of portfolio diversi cation strategies, with a focus on down-side risk metrics, as a portfolio diversification strategy in a European market context. We apply these measures to a set of daily arithmetically compounded returns on a...

Persistent link: https://www.econbiz.de/10011376286

Robust optimization of the equity momentum strategy

Oord, Arco van; Martens, Martin; Dijk, Herman K. van - 2009

Quadratic optimization for asset portfolios often leads to error maximization, with optimizers zooming in on large errors in the predicted inputs, that is, expected returns and risks. The consequence in most cases is a poor real-time performance. In this paper we show how to improve real-time...

Persistent link: https://www.econbiz.de/10011377578

Investment under risk with discrete and continuous assets

Elbers, Chris; Gunning, Jan Willem; Vigh, Melinda - 2009

This paper considers a general class of stochastic dynamic choice models with discrete and continuous decision variables. This class contains a variety of models that are useful for modeling intertemporal household decisions under risk. Our examples are drawn from the field of development...

Persistent link: https://www.econbiz.de/10011378329

Forecast accuracy and economic gains from Bayesian model averaging using time varying weights

Hoogerheide, Lennart; Kleijn, Richard; Ravazzolo, Francesco - 2009

Several Bayesian model combination schemes, including some novel approaches that simultaneously allow for parameter uncertainty, model uncertainty and robust time varying model weights, are compared in terms of forecast accuracy and economic gains using financial and macroeconomic time series....

Persistent link: https://www.econbiz.de/10011378346

Has the Basel II accord encouraged risk management during the 2008 - 09 financial crisis?

McAleer, Michael; Jimenez-Martin, Juan-Angel; Pérez … - 2009

The Basel II Accord requires that banks and other Authorized Deposit-taking Institutions (ADIs) communicate their daily risk forecasts to the appropriate monetary authorities at the beginning of each trading day, using one or more risk models to measure Value-at-Risk (VaR). The risk estimates of...

Persistent link: https://www.econbiz.de/10011378354