We introduce a new coherent risk measure, the minimal-entropy risk measure, which is built on the minimal-entropy 𝜎-martingale measure - a concept inspired by the well-known minimal-entropy martingale measure used in option pricing. While the minimal-entropy martingale measure is commonly...

Since late 2019, during one of the largest pandemics in history, COVID-19, global economic recession has continued. Therefore, investors seek an alternative investment that generates profits during this financially risky situation. Cryptocurrency, such as Bitcoin, has become a new currency tool...

The appropriate choice of a threshold level, which separates the tails of the probability distribution of a random variable from its middle part, is considered to be a very complex and challenging task. This paper provides an empirical study on various methods of the optimal tail selection in...

We consider the problem where a modeller conducts sensitivity analysis of a model consisting of random input factors, a corresponding random output of interest, and a baseline probability measure. The modeller seeks to understand how the model (the distribution of the input factors as well as...

While a lot of research concentrates on the respective merits of VaR and TCE, which are the two most classic risk indicators used by financial institutions, little has been written on the equivalence between such indicators. Further, TCE, despite its merits, may not be the most accurate...

When the uni-variate risk measure analysis is generalized into the multi-variate setting, many complex theoretical and applied problems arise, and therefore the mathematical models used for risk quantification usually present model risk. As a result, regulators have started to require that the...

When the uni-variate risk measure analysis is generalized into the multi-variate setting, many complex theoretical and applied problems arise, and therefore the mathematical models used for risk quantification usually present model risk. As a result, regulators have started to require that the...

The combination of stochastic derivative pricing models and downside risk measures often leads to the paradox (risk, return) = (−infinity, +infinity) in a portfolio choice problem. The construction of a portfolio of derivatives with high expected returns and very negative downside risk...

As life expectancy increases, pension plans face growing longevity risk. Standardized longevity-linked securities such as survivor contracts allow pension plans to transfer this risk to capital markets. However, more consensus is needed on the appropriate mortality model and premium principle to...

The Value-at-Risk (VaR) metric serves as a pivotal tool for quantifying market risk, offering an estimation of potential investment losses. Predominantly employed within financial sectors, it aids in adhering to regulatory mandates and in devising capital reserve strategies. Nonetheless, the...