Heavy tails and volatility clusters are both stylized facts of financial returns that destabilize markets. The former are extreme events by definition and the latter can accelerate adverse market developments. This work disentangles the two sources and examines which one does the greater damage...

The opposition in a number of countries to the inclusion of nuclear energy in a sustainable energy portfolio, in part due to the dread of what the “nuclear” word inspires, has limited quantitative scientific foundation of the real benefits and risks. This has been amplified by the lack of a...

The severity of extreme weather events is increasing due to climate change, giving rise to physical climate risk. However, physical climate risk is not only driven by the severity of individual hazards, but also by the interdependence of those hazards. This paper establishes bounds for the...

This article examines how fi rms facing volatile input prices and holding some degree of market power in their product market link their risk management with their production or pricing strategies. This issue is relevant in many industries ranging from manufacturing to energy retailing, where...

We provide a roadmap to understand and develop resilience, based on the realisation that resilience is the complement of risk, both being associated to the stresses supported by the socio-economic system. We propose instruments for resilience build-up and management based on a novel...

To ensure that central counterparties (“CCPs”) are safe in all market conditions the European Union (EU) has adopted legislation, commonly known as the European Market Infrastructure Regulation (“EMIR”) that deals with their organisational requirements, including prudential requirements...

The paper proposes a framework for large-scale portfolio optimization which accounts for all the major stylized facts of multivariate financial returns, including volatility clustering, dynamics in the dependency structure, asymmetry, heavy tails, and nonellipticity. It introduces a so-called...

In this paper we consider an alternative dividend payment strategy in risk theory, where the dividend rate can never decrease. This addresses a concern that has often been raised in connection with the practical relevance of optimal classical dividend payment strategies of barrier and threshold...

We introduce a class of quantile-based risk measures that generalize Value at Risk (VaR) and, likewise Expected Shortfall (ES), take into account both the frequency and the severity of losses. Under VaR a single confidence level is assigned regardless of the size of potential losses. We allow...

According to our survey about climate risk perceptions, institutional investors believe climate risks have financial implications for their portfolio firms and that these risks, particularly regulatory risks, already have begun to materialize. Many of the investors, especially the long-term,...