Heterogeneous-agents asset pricing theories imply that stockholders' consumption has the first-order effect on equity premium. Motivated by these theories, we evaluate the performance of the conditional CCAPM in explaining time-variation in market returns and cross-sectional variation in...

The purpose of this paper is to investigate the performance of VaR models at measuring risk for WTI oil one-month futures returns. Risk models, ranging from industry standards such as RiskMetrics and historical simulation to conditional extreme value model, are used to calculate commodity market...

We investigate the performance of Value at Risk (VaR) models at measuring risk for WTI oil one-month futures returns. VaR models are used to calculate commodity market risk at extreme quantiles: 0.95, 0.99, 0.995 and 0.999 for both long and short trading positions. Widespread VaR models do not...

This paper mainly focuses on the correlation between live hedge funds return and their value at risk (VaR), which is based on the historical data from May 2000 to April 2010. The authors adopt portfolio level analyses and fund level cross-sectional regression, and find that there is significant...

The quantification of risk and dependence are major components of financial risk modelling. Financial risk modelling frequenty uses the assumption of a normal distribution when considereing the return series which makes modelling easy but is inefficient if the data is not normally distributed or...

We propose a portfolio allocation method based on risk factor budgeting using convex Nonnegative Matrix Factorization (NMF). Unlike classical factor analysis, PCA, or ICA, NMF ensures positive factor loadings to obtain interpretable long-only portfolios. As the NMF factors represent separate...

We investigate the impact of financial crises on two fundamental features of stock returns, namely, the risk-return tradeoff and the leverage effect. We apply the fractionally integrated exponential GARCH-in-mean (FIEGARCH-M) model for daily stock return data, which includes both features and...

Equity basket correlation is an important risk factor. It characterizes the strength of linear dependence between assets and thus measures the degree of portfolio diversification. It can be estimated both under the physical measure from return series, and under the risk neutral measure from...

This paper investigates the prediction of Value-at-Risk (VaR) using option-implied information obtained by the maximum entropy method. The maximum entropy method provides an estimate of the risk-neutral distribution based on option prices. Besides commonly used implied volatility, we obtain...

This paper studies the effects of default risk on equity option returns. We show that there is a cross-sectional and a time-series relation between default risk and option returns. In the cross-section, expected delta-hedged equity option returns have a negative relation with default risk...