The VaR (Value at Risk) concept has emerged back in 1994 when JP Morgan started routinely using it in its daily reporting. Simply said, it represents a lower bound of large rare losses. The VaR metric became an industry standard for measuring market risk because it is intuitive and easy to...

At its core, portfolio and risk management is about gathering and processing market-related data in order to make effective investment decisions. To this end, risk and return statistics are estimated from relevant financial data and used as inputs within the investment process. It is this...

We present a simple new methodology to allow for time-variation in volatilities using a recursive updating scheme similar to the familiar RiskMetrics approach. It exploits the link between exponentially weighted moving average and integrated dynamics of score driven time varying parameter...

In this paper we consider modeling and forecasting of large realized covariance matrices by penalized vector autoregressive models. We propose using Lasso-type estimators to reduce the dimensionality to a manageable one and provide strong theoretical performance guarantees on the forecast...

The two basic questions that every investor tries to answer before investment are questions about predicting return and risk. Risk and return are generally considered two positively correlated sizes, during the growth of risk it is expected increase of return to compensate the higher risk. The...

An intensive and still growing body of research focuses on estimating a portfolio’s Value-at-Risk.Depending on both the degree of non-linearity of the instruments comprised in the portfolio and thewillingness to make restrictive assumptions on the underlying statistical distributions, a...