Accurate modeling of extreme price changes is vital to financial risk management. We examine the small sample properties of adaptive tail index estimators under the class of student-t marginal distribution functions including GARCH and propose a model-based bias-corrected estimation approach....

In the aftermath of the 2008 financial crisis, the need to consider more realistic risk models for derivative products has received renewed attention. We introduce a dynamic model for the pricing of European-style options with various attractive features such as a mixture of heavy-tails and...

Purpose – The paper aims to model multiple-period market risk forecasts under long memory persistence in market volatility. Design/methodology/approach – The paper proposes volatility forecasts based on a combination of the GARCH(1,1)-model with potentially fat-tailed and skewed innovations...

In the aftermath of the 2008 financial crisis, the need to consider more realistic risk models for derivative products has received renewed attention. We introduce a dynamic model for the pricing of European-style options with various attractive features such as a mixture of heavy-tails and...

This paper addresses market risk prediction for high frequency foreign exchange rates under nonlinear risk scaling behaviour. We use a modified version of the multifractal model of asset returns (MMAR) where trading time is represented by the series of volume ticks. Our dataset consists of...

This paper reconsiders return-volume dependence for the U.S. and six international equity markets. We contribute to previous work by proposing surprise volume as a new proxy for private information flow and apply extreme value theory in studying dependence for large volume and return, i.e. under...

Dependence is an important issue in credit risk portfolio modeling and pricing. We discuss a straightforward common factor model of credit risk dependence, which is motivated by intensity models such as Duffie and Singleton (1998), among others. In the empirical analysis, we study dependence...

We study the lead–lag dependence between aggregate credit spreads and equity prices as well as implied equity volatility, which is important for proper credit risk assessment. Our analysis includes daily quotes of the iTraxx Europe index, the Dow Jones Euro Stoxx 50 index, and the Dow Jones...

We propose and test novel multifactor models of daily mutual fund performance. To this aim, we set up equity style indices and derive risk factors, which nest the established Fama and French (1992) and Carhart (1997) factors. We add two additional risk factors, namely idiosyncratic risk and...