In the financial world, the importance of "downside risk" and "higher moments" has been emphasized, predominantly in developing countries such as Pakistan, for a substantial period. Consequently, this study tests four models for a suitable capital asset pricing model. These models are CAPM's...

This article studies a new family of bivariate copulas constructed using the unit-Lomax distortion derived from a transformation of the non-negative Lomax random variable into a variable whose support is the unit interval. Existing copulas play the role of the base copulas that are distorted...

In traditional Reinforcement Learning (RL), agents learn to optimize actions in a dynamic context based on recursive estimation of expected values. We show that this form of machine learning fails when rewards (returns) are affected by tail risk, i.e., leptokurtosis. Here, we adapt a recent...

This paper develops an approach based on Gram-Charlier-like expansions for modeling financial series to take in due account features such as leptokurtosis. A Gram-Charlier-like expansion adjusts the moments of interest of a given distribution via its own orthogonal polynomials. This approach,...

This article presents the Exponential-Generalized Inverse Gaussian regression model with varying dispersion and shape. The EGIG is a general distribution family which, under the adopted modelling framework, can provide the appropriate level of flexibility to fit moderate costs with high...

The aim of this work was to test how returns are distributed across multiple asset classes, markets and sampling frequency. We examine returns of swaps, equity and bond indices as well as the rescaling by their volatilities over different horizons (since inception to Q2-2020). Contrarily to some...

The key purpose of this paper is to present an alternative viewpoint for combining expert opinions based on finite mixture models. Moreover, we consider that the components of the mixture are not necessarily assumed to be from the same parametric family. This approach can enable the agent to...

In this paper, we derive a closed-form expression of the tail probability of the aggregate discounted claims under homogeneous, non-homogeneous and mixed Poisson risk models with constant force of interest by using a general dependence structure between the inter-occurrence time and the claim...

Grouped normal variance mixtures are a class of multivariate distributions that generalize classical normal variance mixtures such as the multivariate t distribution, by allowing different groups to have different (comonotone) mixing distributions. This allows one to better model risk factors...

This study used a researcher self-constructed corporate governance index as a proxy to measure the firm-level corporate governance compliance and disclosure with the 2002 Pakistani Code of Corporate Governance, to examine the relationship between corporate governance and cost of capital. We...