In the context of Merton [1974] and Vasicek [1987, 2002] Gaussian single-factor credit risk models, the authors examine the impact of neglected non-normality of the underlying asset return process on the shape of the derived credit loss distribution and the resulting Basel capital requirements....

In this paper we examine the relationship of optimal forecasts in two different contexts, that is asymmetric preferences and hubris. The former incorporates preference restrictions directly into the shape of the loss function, whilst the latter does so indirectly by constraining the shape of the...

Assuming the time series of random returns to be jointly elliptical, we derive a relationship between its conditional variance and the probability density function of the conditioning set. In the case that such a relationship is linear in a quadratic form for of the conditioning variables, we...