This paper shows how independent component analysis can be used to estimate the generalized orthogonal GARCH model in a fraction of the time otherwise required. The proposed method is a two-step procedure, separating the estimation of the correlation structure from that of the univariate...

In this paper, based on Acharya and Pedersen's overlapping generation model, we show that liquidity risk could influence the market risk forecasting through at least two ways. Then we argue that traditional liquidity adjusted VaR measure, the simply adding of the two risk measure, would...

This paper studies a non-concave optimization problem under a Value-at-Risk (VaR) or an Expected Shortfall (ES) constraint. The non-concavity of the problem stems from the non-linear payoff structure of the optimizing investor. We obtain the closed-form optimal wealth with an ES constraint as...

This article studies the optimal portfolio selection of expected utility maximizing investors who must also manage their market-risk exposures. The risk is measured by a so-called weighted Value-at-Risk (WVaR) risk measure, which is a generalization of both Value-at-Risk (VaR) and Expected...

We consider a portfolio optimization problem of the Black-Litterman type, in which we use the conditional value-at-risk (CVaR) as the risk measure and we use the multi-variate elliptical distributions, instead of the multi-variate normal distribution, to model the financial asset returns. We...

The paper proposes a new approach to model risk measurement based on the Wasserstein distance between two probability measures. It formulates the theoretical motivation resulting from the interpretation of fictitious adversary of robust risk management. The proposed approach accounts for all...

This paper contributes to the literature on cryptocurrencies, portfolio management and estimation risk by comparing the performance of naïve diversification, Markowitz diversification and the advanced Black-Litterman model with VBCs that controls for estimation errors in a portfolio of...

We develop robust models for optimization of the VaR and CVaR risk measures with a minimum expected return constraint under joint ambiguity in distribution, mean returns, and covariance matrix. We formulate models for ellipsoidal, polytopic, and interval ambiguity sets of the means and...

Many investors assign part of their funds to asset managers of mutual funds who are given the task of beating a benchmark. Asset managers usually face a constraint on maximum Tracking Error Volatility (TEV), imposed by the risk management office to keep the risk of the portfolio close to that of...