This paper calculates option portfolio Value at Risk (VaR) using Monte Carlo simulation under a risk neutral stochastic implied volatility model. Compared to benchmark delta-normal method, the model produces more accurate results by taking into account nonlinearity, passage of time,...

As the third component of the Standardized Approach of the Fundamental Review of the Trading Book [1], the Residual Risk Add-On tries to capture the risks not covered by the other two components (Sensitivity Based Method and Default Risk Charge) and plays the role of Risk Not in VaR program or...

The notion of residual estimation risk is introduced in order to study the impact of parameter uncertainty on capital adequacy, for a given risk measure and capital estimation procedure. Residual estimation risk is derived by applying the risk measure on a portfolio consisting of a random loss...

Tail risk refers to the possibility that a rare event would adversely affect the value of a portfolio in a significant manner. It became much more relevant due to recent periods of strong market turbulence.We describe how to quantify such risk, which tail risk protection strategies were...

We use the Least Absolute Shrinkage and Selection Operator (LASSO) quantile regression technique to construct and analyse the complete tail risk connectedness network of the whole US industry system. We also investigate the empirical relationship between input-output linkages and the tail risk...

We present a general framework for measuring the liquidity risk. The theoretical framework defines risk measures that incorporate the liquidity risk into the standard risk measures. We consider a one-period risk measurement model. The liquidity risk is defined as the risk that a security or a...

We analyze the variance risk of commodity markets. We construct synthetic variance swaps and find significantly negative realized and expected variance swap payoffs in most markets. We find evidence of commonalities among the realized payoffs of commodity variance swaps. We also document...