In order to capture observed asymmetric dependence in international financial returns, we construct a multivariate regime-switching model of copulas. We model dependence with one Gaussian and one canonical vine copula regime. Canonical vines are constructed from bivariate conditional copulas and...

In order to capture observed asymmetric dependence in international financial returns, we construct a multivariate regime-switching model of copulas. We model dependence with one Gaussian and one canonical vine copula regime. Canonical vines are constructed from bivariate conditional copulas and...

This paper proposes a new, individual measure of market risk, denoted as the individually acceptable loss (IAL). This measure can be used by portfolio managers in order to better meet the individual profiles of their non-professional clients, including psychological traits. It can be easily...

This paper studies the impact of loss aversion on decisions regarding the allocation of wealth between risky and risk-free assets. We use a Value-at-Risk portfolio model with endogenous desired risk levels that are individually determined in an extended prospect theory framework. This framework...

This paper studies the attitude of non-professional investors towards financial losses and their decisions concerning wealth allocation among consumption, risky, and risk-free financial assets. We employ a two-dimensional utility setting in which both consumption and financial wealth...

In this paper the dynamics of a joint transaction process is investigated. The transaction process is characterized by four marks: price changes, transaction volumes, bid-ask spreads and intertrade durations. Based on a copula approach a model for the joint density is proposed, which avoids...

One important aspect of financial markets is that there might be some traders that intentionally mislead other market participants by creating illusions in order to obtain a profit. We call this new concept illusionary finance. We present an analysis of how illusions can be created and...

We propose a dynamic portfolio selection model that maximizes expected returns subject to a Value-at-Risk constraint. The model allows for time varying skewness and kurtosis of portfolio distributions estimating the model parameters by weighted maximum likelihood in a increasing window setup. We...

In this paper we perform an empirical analysis of the trading process in a pure limit order book market, the Xetra system which operates at various European exchanges. We study how liquidity supply and demand as well as price volatility affect future trading activity and market resiliency, and...

This paper introduces a new multivariate model for time series count data. The Multivariate Autoregressive Conditional Poisson model (MACP) makes it possible to deal withissues of discreteness, overdispersion (variance greater thant then mean) and both auto- and crosscorrelation. We model counts...