We study a concept of dynamic leverage which is a risk measure generalizing traditional value at risk type measures …. This measure is suited for hedge funds and can be applied to quantify risk in a fund of hedge funds. Dynamic leverage … for a fund. Thus dynamic leverage incorporates the minimal holding time of investment and the risk associated with it …

Most portfolio risk analysis implicitly assumes that risks are stable, despite copious evidence of instability. This … article presents an alternative, VarGamma, that provides neat formulas for certainty equivalents (risk-adjusted returns) even …

The purpose of this paper is to investigate whether a dynamic Value at Risk model and high frequency realized …, but are even more pronounced for the 99% VaR. The traditional models severely underestimate risk at higher confidence …

We give a complete algorithm and source code for constructing what we refer to as heterotic risk models (for equities …-doll risk model construction. This appears to prove a powerful approach for constructing out-of-sample stable short …-lookback risk models. Thus, for intraday mean-reversion alphas based on overnight returns, Sharpe ratio optimization using our …

We give a simple explicit algorithm for building multi-factor risk models. It dramatically reduces the number of or … altogether eliminates the risk factors for which the factor covariance matrix needs to be computed. This is achieved via a nested …) industry classification based risk factors (e.g., "sector -> industry -> sub-industry"), and also in the presence of (non …

We revisit the role of liquidity risk. We successfully replicate Pastor and Stambaugh's (2003) gamma liquidity risk … index and, within their time period, concur with their risk premium estimate. An out-of-their-time-period analysis finds … compensation for liquidity risk. We create five alternative liquidity risk indices from various popular liquidity proxies. Using …

The issue of model risk in default modeling has been known since inception of the Academic literature in the field … variables. We then measure how the model risk of choosing or calibrating one of them affects the portfolio loss from default …, using two popular and economically sensible metrics, Value-at-Risk (VaR) and Expected Shortfall (ES) …

Under the Basel II regulatory framework non-negligible statistical problems arise when backtesting risk measures. In …. According to Escanciano and Olmo (2010, 2011) these problems persist when incorporating estimation and model risk by adjusting … adequacy of Value at Risk measures. One main finding indicates that backtests of all classes show heavy size distortions. These …

This article reviews two leading measures of financial risk and an emerging alternative. Embraced by the Basel accords …, value-at-risk and expected shortfall are the leading measures of financial risk. Expectiles offset the weaknesses of value-at-risk … (VaR) and expected shortfall. Indeed, expectiles are the only elicitable law-invariant coherent risk measures. After …