Under the Basel II Accord, banks and other Authorized Deposit-taking Institutions (ADIs) have to communicate their daily risk estimates to the monetary authorities at the beginning of the trading day, using a variety of Value-at-Risk (VaR) models to measure risk. Sometimes the risk estimates...

Private investors have limited time available for learning about stocks as they need to divide their time between stock analysis and work. This paper analyzes the influence of learning constraintsin the form of time constraints on portfolio selection and derives both optimal portfolio holdings...

The use of probability of default estimates to assess the risks of a credit portfolio should not ignore estimation uncertainty. The latter can be quantified by confidence intervals. But assumptions about dependencies of these intervals are inconsistent with assumptions of conventional credit...

This paper focuses on two methods for optimum portfolio selection. We compare Mean-Variance method with Mean-VaR method by the means of investment simulation, based on Czech financial market data from turbulent market periods of the year 2007 and the year 2008. We compare both strategies, basing...

This chapter gives an overview of current research in evolutionary finance. We mainly focus on the survival and stability properties of investment strategies associated with the Kelly rule. Our approach to the study of the wealth dynamics of investment strategies is inspired by Darwinian ideas...

We derive representations for the stock price drift and volatility in the equilibrium of agents with arbitrary, heterogeneous utility functions and with the aggregate dividend following an arbitrary Markov diffusion. We introduce a new, intrinsic characteristic of the aggregate dividend process...