The parameter loss given default (LGD) of loans plays a crucial role for risk-based decision making of banks including risk-adjusted pricing. Depending on the quality of the estimation of LGDs, banks can gain significant competitive advantage. For bank loans, the estimation is usually based on...

The most relevant practical impediment to an application of the Markowitz portfolio selectionapproach is the problem of estimating return moments, in particular return expectations. We analyzethe consequences of using return estimates implied by analysts’ dividend forecasts under the...

A non-stationary regression model for financial returns is examined theoretically in this paper.Volatility dynamics are modelled both exogenously and deterministic, captured by a nonparametriccurve estimation on equidistant centered returns. We prove consistency and asymptotic normalityof a...

In this paper we first investigate the validity of a general Value at Risk approach, which iswidely used for risk management in banking and insurance companies. We discuss and widely rejectthe conventional assumptions, e.g. independent identically distributed normal returns, and as...

We show analytically under quite general conditions that implied rates of return based on analysts' earnings forecasts are only a downward biased estimator for future expected one-period returns and therefore not suited for computing market risk premia. The extent of this bias is substantial as...

The most relevant practical impediment to an application of the Markowitz portfolio selection approach is the problem of estimating return moments, in particular return expectations. We analyze the consequences of using return estimates implied by analysts' dividend forecasts under the explicit...