Electricity retailers face increasing uncertainty due to the ongoing expansion of unpredictable, distributed generation in the residential sector. We analyze how increasing levels of households' solar PV self-generation affect the short-term decisionmaking and associated risk exposure of...

Managing the risk associated with uncertain load has always been a challenge for retailers in electricity markets. Yet the load variability has been largely predictable in the past, especially when aggregating a large number of consumers. In contrast, the increasing penetration of unpredictable,...

Model risk as part of the operational risk is a serious problem for financial institutions. As the pricing of derivatives as well as the computation of the market or credit risk of an institution depend on statistical models the application of a wrong model can lead to a serious over- or...

Classical asset allocation methods have assumed that the distribution of asset returns is smooth, well behaved with stable statistical moments over time. The distribution is assumed to have constant moments with e.g., Gaussian distribution that can be conveniently parameterised by the first two...

Reliable early warning signals are essential for timely implementation of macroeconomic and macro-prudential policies. This paper presents an early warning system as a set of multi-period forecasts of indicators of tail real and financial (systemic) risks. Forecasts are obtained from: (a)...

This paper discusses how central banking is evolving in light of recent experience, with particular emphasis on the incorporation of uncertainty into policy decision-making. The sort of post-crisis uncertainty that central banks are dealing with today is more profound than that which is...

The recent experience from the global financial crisis has raised serious doubts about the accuracy of standard risk measures as a tool to quantify extreme downward risks. Standard risk measures are subject to a “model risk” due to the specification and estimation uncertainty. We propose a...

The paper is an empirical research work wherein the principle of Modern Portfolio Theory along with aspects of geographical diversification have been subjected to test. The validation of the said theory has been made via hypothesis testing in light of the financial market data. The paper has...

These days it's become convention (reinforced by the media's treatment of wealth) to assess our net worth by tallying up the market value of our financial assets, even though it's more natural and useful to think of our wealth as a stream of dollars over time given the nature of our income and...

Managed volatility strategies adjust market exposure in inverse relation to a risk estimate, to stabilize realized portfolio volatility through time. Our paper examines strategy performance from an investment practitioner perspective. Using long-term data from the Standard & Poor's 500, we show...