To examine the familiar tradeoff between risk and return in financial investments, we use a rolling two-stage stochastic program to compare mean-risk optimization models with time series momentum strategies. In a backtest of allocating investment between a market index and a risk-free asset, we...

This paper provides a practical approach to construct and learn a Bayesian network model that will enable an operational risk manager communicate actionable operational risk information for informed decision making by senior managers. Bayesian networks and their application in operational risk...

The risk reducing benefits of the sovereign bond-backed security (SBBS) proposal of Brunnermeier et al. (2016) have been assessed in terms of the likely losses that different kinds of holders would suffer under simulated default scenarios. However, the effects of mark-to-market losses that may...

Various risk measures have been reviewed against the criteria commonly accepted by financial researchers and practitioners: coherence, elicitability, comonotonic additivity, and intuitiveness. It follows that the only risk measure that is both coherent and elicitable is an Expectile based risk...

This paper studies the tail risk of US equity markets in advance of the COVID-19 outbreak in February 2020, providing evidence that financial markets are informative about pandemic risk well in advance of the actual outbreak. Specifically, while the tail risk of the market index did not respond...

Since 2008’s financial crisis, risk management has focused in extreme market movements, i.e. low probability but high impact financial returns. This requires to precisely know the far tails of the probability distribution function underlying the returns’ generation process. Extreme values...

Motivated by recent advances on elicitability of risk measures and practical considerations of risk optimization, we introduce the notions of Bayes pairs and Bayes risk measures. Bayes risk measures are the counterpart of elicitable risk measures, extensively studied in the recent literature....

Utility-based shortfall risk (SR) measure proposed by (F\”ollmer and Schied, 2002) has been well studied in risk management and finance. In this paper, we revisit the concept from insurance premium perspective. We show under some moderate conditions that the indifference equation-based...