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Portfolio selection with active risk monitoring

Paolella, Marc S.; Polak, Pawel - 2015

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...

Persistent link: https://www.econbiz.de/10011410659

Risk measures based on benchmark loss distributions

Bignozzi, Valeria; Burzoni, Matteo; Munari, Cosimo-Andrea - 2018

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...

Persistent link: https://www.econbiz.de/10011900226

A theory of scenario generation

Schneider, Paul - 2019

We show how distributions can be reduced to low-dimensional scenario trees. Applied to intertemporal distributions, the scenarios and their probabilities become time-varying factors. From S&P 500 options, two or three time-varying scenarios suffice to forecast returns, implied variance or...

Persistent link: https://www.econbiz.de/10012003165

Power law scaling and "Dragon-Kings'' in distributions of intraday financial drawdown

Filimonov, Vladimir; Sornette, Didier - 2014

significant transient dependence between returns and (ii) the presence of large outliers (dragon-kings) characterizing the extreme …

Persistent link: https://www.econbiz.de/10010412365

Multiple outlier detection in samples with Exponential & Pareto tails : redeeming the inward approach & detecting Dragon Kings

Wheatley, Spencer; Sornette, Didier - 2015

We consider the detection of multiple outliers in Exponential and Pareto samples -- as well as general samples that … block and sequential tests, are compared for their power and errors, in cases including no outliers, dispersed outliers (the … classical slippage alternative), and clustered outliers (a case seldom considered). We advocate a density mixture approach for …

Persistent link: https://www.econbiz.de/10011411972

Risk and Resilience Management in Social-Economic Systems

Kovalenko, Tatyana; Sornette, Didier - 2016

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...

Persistent link: https://www.econbiz.de/10011516605

Estimating the joint tail risk under the filtered historical simulation : an application to the CCP's default and waterfall fund

Barone-Adesi, Giovanni; Giannopoulos, Kostas; Vosper, Les - 2015

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...

Persistent link: https://www.econbiz.de/10011296075

Stress Tests and Capital Requirement Disclosures : Do They Impact Banks' Lending and Risk-Taking Decisions?

Konietschke, Paul; Ongena, Steven; Ponte Marques, Aurea - 2022

How do banks respond to changes in capital requirements as a result of the stress tests? Does the disclosure of stress test results matter? To answer these questions, we study the impact of European stress tests on banks' lending, their corresponding risk-taking, the ensuing effect on their...

Persistent link: https://www.econbiz.de/10013403421

'Speculative Influence Network' During Financial Bubbles : Application to Chinese Stock Markets

Lin, Li - 2015

We introduce the Speculative Influence Network (SIN) to decipher the causal relationships between sectors (and/or firms) during financial bubbles. The SIN is constructed in two steps. First, we develop a Hidden Markov Model (HMM) of regime-switching between a normal market phase represented by a...

Persistent link: https://www.econbiz.de/10013012557

The Disciplining Effect of Supervisory Scrutiny in the EU-Wide Stress Test

Pancaro, Cosimo; Kok Sørensen, Christoffer; Müller, Carola - 2022

Relying on confidential supervisory data related to the 2016 EU-wide stress test, this paper presents novel empirical evidence that supervisory scrutiny associated to stress testing has a disciplining effect on bank risk. We find that banks that participated in the 2016 EU-wide stress test...

Persistent link: https://www.econbiz.de/10013403472

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