Bank regulation is supposed to reduce the probability of bank failure and, if a failure occurs, to contain the damage so that system-wide problems are unlikely. The current regulatory framework, known as Basel II, is based, among other things, on risk-adjusted capital requirements. This...

It has been shown in the literature that the task of estimating the parameters of nonlinear models may be tackled with optimization heuristics. Thus, we attempt to carry these intuitions over to the estimation procedure of smooth transition autoregressive (STAR, Teräsvirta, 1994) models by...

Empirical distributions are often claimed to be superior to parametric distributions, yet to also increase the computational complexity and are therefore hard to apply in portfolio optimization. In this paper, we approach the portfolio optimization problem under constraints on the portfolio’s...

This paper investigates the time-varying corporate bond index returns in a multi-factor smooth transition regression model. We find that expected index returns vary between weak and strong economic regimes, where the transition from one regime to the other is governed by the 3-quartered growth...

Copulas provide investors with tools to model the dependence structure of financial products. The choice of copulas plays an important role in successful copula applications. This paper discusses the copula selection problem for the so-called 'D-vine' decomposition from a perspective of the...

"Portfolio Management with Heuristic Optimization consist of two parts. The first part (Foundations) deals with the foundations of portfolio optimization, its assumptions, approaches and the limitations when ""traditional"" optimization techniques are to be applied. In addition, the basic...