We study capital requirements for bounded financial positions defined as the minimum amount of capital to invest in a chosen eligible asset targeting a pre-specified acceptability test. We allow for general acceptance sets and general eligible assets, including defaultable bonds. Since the...

We discuss risk measures representing the minimum amount of capital a financial institution needs to raise and invest in a pre-specified eligible asset to ensure it is adequately capitalized. Most of the literature has focused on cash-additive risk measures, for which the eligible asset is a...

Following a trend of sustained and accelerated growth, the VIX futures and options market has become a closely followed, active and liquid market. The standard stochastic volatility models—which focus on the modeling of instantaneous variance—are unable to fit the entire term structure of...

<title>Abstract</title>Given bid-offer quotes for a set of listed vanilla options, a fundamental need of option market makers is to interpolate and extrapolate the available quotes to a full arbitrage-free surface. We propose a methodology which directly controls the trade-off between smoothness and bid-offer...

The risk of financial positions is measured by the minimum amount of capital to raise and invest in eligible portfolios of traded assets in order to meet a prescribed acceptability constraint. We investigate nondegeneracy, finiteness and continuity properties of these risk measures with respect...

We discuss risk measures representing the minimum amount of capital a financial institution needs to raise and invest in a pre-specified eligible asset to ensure it is adequately capitalized. Most of the literature has focused on cash-additive risk measures, for which the eligible asset is a...

We study capital requirements for bounded financial positions defined as the minimum amount of capital to invest in a chosen eligible asset targeting a pre-specified acceptability test. We allow for general acceptance sets and general eligible assets, including defaultable bonds. Since the...

We find that in cumulative prospect theory (CPT) with a concave value function in gains, a lottery with finite expected value may have infinite subjective value. This problem does not occur in expected utility theory. The paradox occurs in particular in the setting and the parameter regime...

We study stock market reactions to large international military conflicts since World War II. Using a news analysis proxy for the estimated likelihood that a conflict will result in a war, we find that an increase in the war likelihood tends to decrease stock prices, but the ultimate outbreak of...

The new regulation of the EU for financial products (UCITS IV) prescribes Value at Risk (VaR) as the benchmark for assessing the risk of structured products. We discuss the limitations of this approach and show that, in theory, the expected return of structured products is unbounded while the...