Purpose – This study aims to examine the stock returns distributions in ten countries in the periods before and after the global financial crisis (GFC) to evaluate how well the empirical distributions conformed to the extreme value theory (EVT) which underlies a family of risk management...

This paper reviews the basic methodologies for the estimation of Value at Risk (VaR) that are currently in use in international stock and financial market regulation and portfolio management. The main shortcomings of these methodologies are exposed and the direct consequences of ignoring these...

It is well known that investors usually assign part of their funds to asset managers who are given the task of beating a benchmark portfolio. On the other hand, the risk management office could impose some restrictions to the asset managers' activity in order to mantain the overall portfolio...

Numerical evaluation of performance measures in heavy-tailed risk models is an important and challenging problem. In this paper, we construct very accurate approximations of such performance measures that provide small absolute and relative errors. Motivated by statistical analysis, we assume...

High price volatility in energy markets compels the companies to adopt and implement policies for measurement and management of the energy risk. A popular measure of risk exposure is the Value at Risk (VaR). Traditional methods of estimation of VaR used by major energy companies fail to capture...

Under the Basel II regulatory framework non-negligible statistical problems arise when backtesting risk measures. In this setting backtests often become infeasible due to a low number of violations leading to heavy size distortions. According to Escanciano and Olmo (2010, 2011) these problems...

Seeing the firm as a nexus of activities and projects, we propose a characterization of the firm where variations in the market price of risk should induce adjustments in the firm's portfolio of projects. In a setting where managers disagree with respect to what investment maximizes value,...

Evaluating portfolio risk typically requires that correlation estimates of security returns be made. Historical financial events have shown that correlations can rise quickly, causing a huge increase in portfolio risk. Therefore, in stress testing portfolios, it is important to consider the...

This paper aims to determine if during the recent European financial crisis European markets are efficient in the weak form, as well to introduce an approach to properly predict daily risk of portfolios composed by these market assets, considering their dependence structure. We use daily data...

In terms of a portfolio of shares, market risk is caused by the price change measures under discussion and that is why it is important to consider carefully the historical evolution of prices in order to be able to determine if there is a certain cyclical trend that may affect the portfolio in...