This paper deals with risk measurement and portfolio optimization under risk constraints. Firstly we give an overview of risk assessment from the viewpoint of risk theory, focusing on moment-based, distortion and spectral risk measures. We subsequently apply these ideas to an asset management...

We propose new closed-form pricing formulas for interest rate options which guarantee perfect compatibility with volatility smiles. These cap pricing formulas are computed under variance optimal measures in the framework of the market model or the Gaussian model and achieve an exact calibration...

This paper constructs a model for the evolution of a risky security that is consistent with a set of observed call option price. It explicitly treats the fact that only a discrete data set can be observed in practice, The framework is general and allows for state dependent volatility and jumps.

We consider the mean-variance hedging problem when asset prices follow ItÆ processes in an incomplete market framework. The hedging numÊraire and the variance-optimal martingale measure appear to be a key tool for characterizing the optimal hedging strategy (see GouriÊroux et al. 1996;...

We consider the mean-variance hedging problem when the risky assets price process is a continuous semimartingale. The usual approach deals with self-financed portfolios with respect to the primitive assets family. By adding a numéraire as an asset to trade in, we show how self-financed...

This paper is dedicated to risk analysis of credit portfolios. Assuming that default indicators form an exchangeable sequence of Bernoulli random variables and as a consequence of de Finetti's theorem, default indicators are Binomial mixtures. We can characterize the supermodular order between...

This paper constructs a model for the evolution of a risky security that is consistent with a set of observed call option prices. It explicitly treats the fact that only a discrete data set can be observed in practice. The framework is general and allows for state dependent volatility and jumps....