Measures of model risk based on the residual error from hedging in a misspecified model were recently proposed in … (Detering and Packham, 2013). These measures rely on the assumption that the model used for hedging represents a complete … model risk for the original market. If the market can not be completed, as it is the case in most market models that allow …

The combination of stochastic derivative pricing models and downside risk measures often leads to the paradox (risk … expected returns and very negative downside risk (henceforth "golden strategy") has only been studied if all the involved … multi-asset golden strategies for both the expected shortfall and the expectile risk measure, and shows that the use of …

In this paper, we adopt a partial differential equation (PDE) approach to calculate price and risk measures for … mortgage backed securities (MBS). The interest rate path-dependency is handled by an augmented state variable with discrete … of pass-through and structured MBS. We show how option adjusted spread, duration, convexity, vega and value at risk can …

The forward-looking nature of option market data allows one to derive economically-based and model-free risk measures … classical risk measures for the S&P500 Index. Delivering good results both at short and long time horizons, the proposed option …-implied risk metrics emerge as a convenient alternative to the existing risk measures …

calibrated to market extreme scenarios, incorporating the need of regulators and financial institutions in more sensitive risk … and loss distribution. The findings show that our Lambda VaR estimations are able to capture the tail risk and react to …

incorporate mortality risk. We prove limiting results for the hedging strategies and demonstrate mortality risk diversification …. Numerical examples are provided which illustrate the effectiveness of hedging and the diversification of mortality risk under … optimal policyholder behaviour. The binomial model results in explicitly formulated perfect hedging strategies funded using …

yields and negative volatility risk premia. This study proposes a hedging strategy for volatility as an asset class that …) timely hedging strategy removes the extreme negative tail risk and reduces the negative skewness in exchange for slightly … risk factors …

In this note, I study further the approach introduced in for the hedging of derivatives in incomplete markets via local … risk minimization. A structure result is provided, which essentially shows the equivalence between non-quadratic risk … minimization under the historical probability and quadratic local risk minimization under an equivalent, implicitly defined …