We simulate a simplified version of the price process including bubbles and crashes proposed in Kreuser and Sornette (2018). The price process is defined as a geometric random walk combined with jumps modelled by separate, discrete distributions associated with positive (and negative) bubbles....

Financial risk managers routinely use non-linear time series models to predict the downside risk of the capital under management. They also need to evaluate the adequacy of their model using so-called backtesting procedures. The latter involve hypothesis testing and evaluation of loss functions....

This paper revisits the performance of frequently used risk forecasting methods, such as the Value-at-Risk models. The aim is to analyze its performance, and mitigate its pitfalls by incorporating conditional variance estimates, as generated by a GARCH model. Notably, this paper tests several...

The country risk literature argues that country risk ratings have a direct impact on the cost of borrowings as they reflect the probability of debt default by a country. An improvement in country risk ratings, or country creditworthiness, will lower a country’s cost of borrowing and debt...

In the aftermath of the Global Financial Crisis, some risk management practitioners have advocated wider adoption of Bayesian inference to replace Value- at-Risk (VaR) models in order to minimize risk failures. Despite its limitations, the Bayesian methodology has significant advantages. Just...

In aftermath of the Financial Crisis, some risk management practitioners advocate wider adoption of Bayesian inference to replace Value-at-Risk (VaR) models for minimizing risk failures (Borison & Hamm, 2010). They claim reliance of Bayesian inference on subjective judgment, the key limitation...

This paper evaluates the performance of carry trade strategies with macro fundamentals in a Markov switching dynamic factor augmented regression framework and compares the performance statistics with the benchmark model of a random walk and momentum strategy. I make simulations with the Japanese...

Forecasting stock market returns is one of the most effective tools for risk management and portfolio diversification. There are several forecasting techniques in the literature for obtaining accurate forecasts for investment decision making. Numerous empirical studies have employed such methods...

This contribution starts out by noting a conflict of interest between consumers and insurers. Consumers face positive correlation in their assets (health, wealth, wisdom, i.e. skills), causing them to demand a great deal of insurance coverage. Insurers on the other hand eschew positively...