Assuming a Constant Elasticity of Variance (CEV) model for the asset price, that is a defaultable asset showing the so called leverage effect (high volatility when the asset price is low), a VaR constraint reevaluated over time induces an agent more risk averse than a logarithmic utility to take...

This paper investigates a stock-bond portfolio s tail risks such as value-at-risk (VaR) and expected shortfall (ES) and the optimum asset allocation, and the way in which these measures have been a¤ected by the recent global financial crisis (GFC). The semiparametric method is used to estimate...

In recent years both equity and bond markets have been afflicted by high volatility. In order to build up a conservative portfolio several models may be used, such as minimum variance portfolio or equally weighted portfolio. In 2008/09 another way to deal with diversification came up, that is...

The recent experience from the global financial crisis has raised serious doubts about the accuracy of standard risk measures as a tool to quantify extreme downward risks. Standard risk measures are subject to a “model risk” due to the specification and estimation uncertainty. We propose a...

This paper examines the effects of liquidity on the stock and portfolio risk measure by Value at Risk (VaR). Using daily stock returns and firm market capitalization, empirical calculation of VaR that confirmed not yet succeeded to prove pattern of relations between risk and liquidity both...

We study portfolio selection using Conditional Value-at-Risk and, as its natural extension, spectral risk measures instead of the variance. We do not focus only on the derivation of the efficient frontiers, but also consider the choice of optimal portfolios within an integrated framework. We...

Existence of underestimation bias on risk for optimized portfolio is well known to quantitative fund managers who construct their portfolio from optimizer (mathematical software) by using multi factor risk model. There are some reasons for underestimation of portfolio risk. One of the reasons of...

This paper addresses the problem of dynamic asset allocation under a bounded shortfall risk in a market composed of three assets: cash, stocks and a zero coupon bond. The dynamics of the instantaneous short rates is driven by a Hull and White model. In this setting, we determine and compare...