Showing 1 - 10 of 756,716
econometric modeling techniques for tail risk measurement: the extreme downside hedge (EDH) and the extreme downside correlation …
Persistent link: https://www.econbiz.de/10012839210
We present an analytical framework for the forward-looking measurement of extreme market risk. In contrast to standard … techniques relying on past return data, we propose to extract Value-at-Risk and Expected Shortfall under the physical measure … from current option prices. Our empirical evidence suggests that the resulting estimates accurately capture the tail risk …
Persistent link: https://www.econbiz.de/10012934763
We comprehensively investigate the usefulness of tail risk measures proposed in the literature. We evaluate both the …) performs the best overall. While some other tail risk measures excel at specialized tasks, BT11Q performs well in all tests …
Persistent link: https://www.econbiz.de/10014353989
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 … nominal model. The Wasserstein approach suits for all types of model risk problems, ranging from the single-asset hedging risk …
Persistent link: https://www.econbiz.de/10012911323
In line with regulations and common risk management practice, the credit risk of a portfolio is managed via its … computations to exposure computations, firms find it expedient to compute these exposures under the risk neutral measure.Here we … show that exposures computed under the risk neutral measure are essentially arbitrary. They depend on the choice of …
Persistent link: https://www.econbiz.de/10012973703
Risk (VaR) framework for the market risk capital of bank trading books. While the new rule boosts capital standards, the … capital requirement seems overly burdensome and not sufficiently responsive to market dynamics. It also increases model risk … and opaqueness of capital estimates. Chaudhury (2011) recently reported that the extreme tail risk of US stock portfolios …
Persistent link: https://www.econbiz.de/10013127086
incorporate the liquidity risk into the standard risk measures. We consider a one-period risk measurement model. The liquidity …We present a general framework for measuring the liquidity risk. The theoretical framework defines risk measures that … risk is defined as the risk that a security or a portfolio of securities cannot be sold or bought without causing changes …
Persistent link: https://www.econbiz.de/10012904558
techniques try to estimate. For this we introduce tail risk bands, a practical risk measurement tool that categorizes risk levels …One of the fundamental requirements of investment management is the ability to assess risk and to adjust exposure to … control tail risk, the risk of larger than acceptable losses. Since the onset of the recent credit crisis, the effects of …
Persistent link: https://www.econbiz.de/10013038555
We propose new systematic tail risk measures constructed using two different approaches. The first extends the … market crash risk. Both tail risk measures are associated with a significantly positive risk premium after controlling for … other measures of downside risk, including downside beta, co-skewness and co-kurtosis. Using these measures, we examine the …
Persistent link: https://www.econbiz.de/10012977194
We test for the presence of a systematic tail risk premium in the cross-section of expected returns by applying a …
Persistent link: https://www.econbiz.de/10013061770