We propose a general robust semiparametric bootstrap method to estimate conditional predictive distributions of GARCH-type models. Our approach is based on a robust estimator for the parameters in GARCH-type models and a robustified resampling method for standardized GARCH residuals, which...

Three types of agents acting on different information sets are considered: fully informed agents, insiders, and outsiders. Differences in information quality are shown to affect the properties of their optimal portfolios. For an outsider, the share of wealth invested in the stock is decreasing...

Prospect Theory is a widely accepted descriptive framework to model decisions under risk. However, it is limited to situations with finitely many outcomes. Moreover, it is discontinuous, i.e., small changes in a lottery can produce large differences in its utility, contrary to experiments. In...

In this paper, we show that coherent upper and lower previsions as well as coherent risk measures are only meaningful under the assumption that one starts with initial wealth being constantly 0. This implies at least for coherent upper and lower previsions a correction of their interpretation,...

A class of contribution values for pairs of random variables is introduced as a technical tool for the problem how the risk capital needed for a portfolio of random activities should be allocated to its components. The well known allocation model with expected shortfall as corresponding risk...

A new and quite general model class for modeling asset returns and forecasting Value at Risk is proposed. It combines a dynamic multi-component GARCH structure with the stable Paretian distributional assumption. The new model nests several successful models for modeling asset returns, including...

Like many financial contracts, derivatives are subject to default risk. A very popular mechanism in derivatives markets to mitigate the risk of non-performance on contracts is margining. By attaching collateral to a contract, margining supposedly reduces default risk. The broader impacts of the...

This paper analyzes the relation between agency conflicts and risk management in a contingent claims model of the firm. In contrast to previous contributions, our analysis incorporates not only stockholder-debtholder conflicts but also managerstockholder conflicts. In particular we consider a...

This paper develops a quantitative framework for analyzing the impact of macroeconomic conditions on credit risk and dynamic capital structure choice. We begin by observing that when cash flows depend on current economic conditions, there will be a benefit for firms to adapt their default and...

Economic cycles are the key credit portfolio risk driver and they are autocorrelated over time. We then show that it is economically meaningful to define risk for credit portfolios in a multi period setup. Since one period expected shortfall fails to measure risk adequately in a multi period...