We consider a risk-aware multi-armed bandit framework with the goal of avoiding catastrophic risk. Such a framework has multiple applications in financial risk management. We introduce a new conditional value-at-risk (CVaR) estimation procedure combining extreme value theory with automated...

The cryptocurrency market offers significant investment opportunities but also entails higher risks as compared to other asset classes. This article aims to analyse the financial risk characteristics of individual cryptocurrencies and of a broad cryptocurrency market portfolio. We construct a...

This paper investigates the dynamic evolution of tail risk interdependence among U.S. banks, financial services and insurance sectors. Life and non-life insurers have been considered separately to account for their different characteristics. The tail risk interdependence measurement framework...

The statistical distribution of financial returns plays a key role in evaluating Value-at-Risk using parametric methods. Traditionally, when evaluating parametric Value-at-Risk, the statistical distribution of the financial returns is assumed to be normally distributed. However, though simple to...

This paper uses simulation-based portfolio optimization to mitigate the left tail risk of the portfolio. The contribution is twofold. (i) We propose the Markov regime-switching GARCH model with multivariate normal tempered stable innovation (MRS-MNTS-GARCH) to accommodate fat tails, volatility...

Developments in the world of finance have led the authors to assess the adequacy of using the normal distribution assumptions alone in measuring risk. Cushioning against risk has always created a plethora of complexities and challenges; hence, this paper attempts to analyse statistical...

In this paper, we extend the parametric approach of VaR estimation that is based upon the application of two transforms, one for handling skewness and other for kurtosis. These transformations restore normality to data when applied in succession. The transforms are well defined and offer an...

In this paper we propose a maximum entropy estimator for the asymptotic distribution of the hedging error for options. Perfect replication of financial derivatives is not possible, due to market incompleteness and discrete-time hedging. We derive the asymptotic hedging error for options under a...

In this paper, a new three-parameter Pareto distribution is introduced and studied. We discuss various mathematical and statistical properties of the new model. Some estimation methods of the model parameters are performed. Moreover, the peaks-over-threshold method is used to estimate...