In this paper, we find that the relationship between the value-at-risk (VaR) and expected returns is negative and this negative relationship between the VaR and expected returns can be explained by volatility in the U.S. market. However, for different levels of investor sentiment, this...

We apply wavelet analysis to observe financial returns. We demonstrate how useful wavelets can be to separate normal market conditions from stressed market conditions. After noise removal, a process appears to manifest itself during period of financial distress and show a remarkable alignment...

This paper derives the moment functions of the truncated skewed type III generalized logistic (SGL). These are then applied in finance for the development of value-at-risk, expected shortfall and downside risk measures for investment returns and values. The SGL distribution provides and good fit...

This paper investigates international index return predictability using daily-updated option-implied information in predictive regressions and out-of-sample forecasts. We document the significant predictive power of the variance risk premium (VRP), Generalized Riskiness (GR), and higher-order...

The plain market-beta was a good predictor of stock returns not only during bull and ordinary markets, but also during bear markets and crashes. Thus, it was indeed a good measure of the hedge against market risk. This plain beta also predicted the subsequent down-beta (i.e., measured only on...

We introduce and solve an optimal asset allocation problem under a weighted expected shortfall (WES) constraint, which contains the risk management problem under an expected shortfall constraint of Basak and Shapiro (2001) as a special case. Furthermore, we link our risk management problem under...

Weekly, quarterly and yearly risk measures are crucial for risk reporting according to Basel III and Solvency II. For the respective data frequencies, the authors show in a simulation and back-test study that available data series are not sufficient in order to estimate Value at Risk and...

Since borrowers want minimal pressure to repay early while depositors want minimal constraints on withdrawals, banks typically borrow short to lend long. This is known as duration mismatch. To mitigate the risks, banks are required to hold capital buffers, which are intended to cover all losses...

Risk measures are the historical predictors of investment. Risk and volatility are major components in the world of modern investment. There are five principal risk measures: Alpha: Measures risk relative to the market or benchmark index, Beta: Measures volatility or systemic risk compared to...

We study how to manage commodity risks (price and volume) via procurement and financial hedging for a value-at-risk (VaR) risk-averse newsvendor. Facing stochastic procurement cost from the commodity market, the firm decides on its financial hedging strategy contingent on the procurement cost...