We consider economic obstacles that limit the reliability and accuracy of value-at-risk (VaR). Investors who manage large market transactions should take into account the impact of the randomness of large trade volumes on predictions of price probability and VaR assessments. We introduce...

This paper takes the trade dataset of the value C and the volume V of executed transactions and regards relations C=pV as the only definition of the implemented price p. Any other price definitions, price models and forecasts form agents price expectations. Expectations force agents perform...

This paper considers the asset price p as relations C=pV between the value C and the volume V of the executed transactions and studies the consequences for the option pricing equations. We show that the classical BSM model implicitly assumes that value C and volume V of transactions follow...

This paper discusses the value-at-risk (VaR) concept and assesses the financial adequacy of the price probability determined by frequency of trades at price p. We take the price definition as the ratio of executed trade value to volume and show that it leads to price statistical moments, which...

This paper considers the asset price p as relations C=pV between the value C and the volume V of the executed transactions and studies the consequences of this definition for the option pricing equations. We show that the classical BSM model implicitly assumes that value C and volume V of...

We consider the core problems of the conventional value-at-risk (VaR) based on the price probability determined by frequencies of trades at a price p during an averaging time interval Δ. To protect investors from risks of market price change, VaR should use price probability determined by the...

In this paper we show that the Chilean exchange rate has the ability to predict the returns of the London Metal Exchange Index and of the six primary non-ferrous metals that are part of the index: aluminum, copper, lead, nickel, tin and zinc. The economic relationship hinges on the present-value...

The theory of fair geometric returns, F theory for short, rejects the generally accepted notion that volatility is the risk of risky assets. Instead, it claims that capital market volatility, in turn, constitutes the maximum achievable geometric return. In order to get to the point, F theory, in...

This paper presents a new model for valuing hybrid defaultable financial instruments, such as, convertible bonds. In contrast to previous studies, the model relies on the probability distribution of a default jump rather than the default jump itself, as the default jump is usually inaccessible....