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A note on the impact of parameter uncertainty on barrier derivatives
Escobar, Marcos; Panz, Sven - In: Risks : open access journal 4 (2016) 4, pp. 1-25
This paper presents a comprehensive extension of pricing two-dimensional derivatives depending on two barrier constraints. We assume randomness on the covariance matrix as a way of generalizing. We analyse common barrier derivatives, enabling us to study parameter uncertainty and the risk...
Persistent link: https://www.econbiz.de/10011556565
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Model risk in portfolio optimization
Stefanovits, David; Schubiger, Urs; Wüthrich, Mario V. - In: Risks : open access journal 2 (2014) 3, pp. 315-348
We consider a one-period portfolio optimization problem under model uncertainty. For this purpose, we introduce a …
Persistent link: https://www.econbiz.de/10010400258
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Risk and policy uncertainty on stock-bond return correlations : evidence from the US markets
Chiang, Thomas C. - In: Risks : open access journal 8 (2020) 2/58, pp. 1-16
This paper investigates dynamic correlations of stock-bond returns for different stock indices and bond maturities. Evidence in the US shows that stock-bond relations are time-varying and display a negative trend. The stock-bond correlations are negatively correlated with implied volatilities in...
Persistent link: https://www.econbiz.de/10012292914
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Direct and hierarchical models for aggregating spatially dependent catastrophe risks
Wójcik, Rafał; Liu, Charlie Wusuo; Guin, Jayanta - In: Risks : open access journal 7 (2019) 2/54, pp. 1-22
We present several fast algorithms for computing the distribution of a sum of spatially dependent, discrete random variables to aggregate catastrophe risk. The algorithms are based on direct and hierarchical copula trees. Computing speed comes from the fact that loss aggregation at branching...
Persistent link: https://www.econbiz.de/10012019121
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Is economic uncertainty a risk factor in bank loan pricing decisions? : international evidence
Ashraf, Badar Nadeem - In: Risks : open access journal 9 (2021) 5, pp. 1-17
Uncertainty in economic environment leads economic agents to act cautiously. In this paper, we postulate that such uncertainty leads banks to charge higher interest rate on loans. Measuring aggregate country-level economic uncertainty with the World Uncertainty Index (WUI) and using a bank-level...
Persistent link: https://www.econbiz.de/10012508796
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Is gold a hedge against stock price risk in U.S. or Indian markets?
Manuj, Hemant - In: Risks : open access journal 9 (2021) 10, pp. 1-15
We study whether gold acts as a hedge or a safe haven in U.S. and the Indian stock markets. These two stock markets have been chosen as representatives of the developed markets and the emerging markets, respectively, and are of significant interest to long-term investors. We apply a linear...
Persistent link: https://www.econbiz.de/10012632191
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Equity risk and return across hidden market regimes
Endovitsky, Dmitry A.; Korotkikh, Viacheslav V.; … - In: Risks : open access journal 9 (2021) 11, pp. 1-21
The key to understanding the dynamics of stock markets, particularly the mechanisms of their changes, is in the concept of the market regime. It is regarded as a regular transition from one state to another. Although the market agenda is never the same, its functioning regime allows us to reveal...
Persistent link: https://www.econbiz.de/10012703075
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Can machine learning-based portfolios outperform traditional risk-based portfolios? : the need to account for covariance misspecification
Jain, Prayut; Jain, Shashi - In: Risks : open access journal 7 (2019) 3/74, pp. 1-27
The Hierarchical risk parity (HRP) approach of portfolio allocation, introduced by Lopez de Prado (2016), applies graph … theory and machine learning to build a diversified portfolio. Like the traditional risk-based allocation methods, HRP is also …-based portfolios. For our analysis, we use the test for superior predictive ability on out-of-sample portfolio performance, to …
Persistent link: https://www.econbiz.de/10012127594
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A robust general multivariate chain ladder method
Peremans, Kris; Van Aelst, Stefan; Verdonck, Tim - In: Risks : open access journal 6 (2018) 4, pp. 1-18
fully settled. Since the predictions of the aggregate portfolio (consisting of different subportfolios) do not need to be … traditional GMCL method and the good performance of the robust GMCL method is shown. From the analysis of a portfolio from …
Persistent link: https://www.econbiz.de/10011906200
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Credit risk meets random matrices : coping with non-stationary asset correlations
Mühlbacher, Andreas; Guhr, Thomas - In: Risks : open access journal 6 (2018) 2, pp. 1-25
. Furthermore, we present numerical simulations for concurrent portfolio risks, i.e., for the joint probability densities of losses …
Persistent link: https://www.econbiz.de/10011866403