Purpose – For publicly traded firms, calculating the cost of capital is predicated typically on information from the financial markets. Small businesses do not have the necessary market‐based information. As an alternative to traditional proxy approaches, this paper presents a...

Purpose – The purpose of this paper is to describe a generalization of the familiar two‐sample t ‐test for equality of means to the case where the sample values are to be given unequal weights. This is a natural situation in financial risk modeling when some samples are considered more...

Purpose – To study the effect of Knightian uncertainty – as opposed to statistical estimation error – in the evaluation of value‐at‐risk (VaR) of financial investments. To develop methods for augmenting existing VaR estimates to account for Knightian uncertainty....

Purpose – Interest rate risk immunization is one of the key concerns for fixed income portfolio management. In recent years, the affluence of new risk measures has emphasized the importance of comparing them with the classic approaches. As a result, one question arises: what is the relation...

Purpose – The development of alternative investment has not yet been accompanied by genuine consideration of the specific characteristics of the risks and returns of hedge funds with regard to the provision of information to investors. To fill the gap, in 2004 EDHEC launched an international...

Purpose – To consider why the law of large numbers does not play a more significant role in determining an insurer's financial leverage. Design/methodology/approach – Insurer‐group data show that there is little relationship between an insurer's premium volume and its overall leverage...

Purpose – This paper aims to test empirically the performance of different models in measuring VaR and ES in the presence of heavy tails in returns using historical data. Design/methodology/approach – Daily returns of popular indices (S&P500, DAX, CAC, Nikkei, TSE, and FTSE) and currencies...

Purpose – The aim of this paper is to fill a gap in the foreign‐exchange trading risk‐management literature and particularly from the perspective of emerging and illiquid markets, such as in the context of the Moroccan foreign‐exchange market. Design/methodology/approach – This paper,...

Purpose – This paper aims to investigate how effectively the value at risk (VaR) estimated using the student‐ t distribution captures the market risk. Design/methodology/approach – Two alternative VaR models, VaR‐t and VaR‐x models, are presented and compared with the benchmark model...

Purpose – The purpose of this paper is to consider the problem of allocating responsibility for risk through a simple classroom vignette that illustrates some of the difficulties encountered in more complex real‐world scenarios. Design/methodology/approach – After considering a number of...