Pourbabaee, Kwak, and Pirvu (2016) determine the constant-mix strategy that minimizes Capital at Risk (CaR) under a negative correlation constraint with a benchmark. We extend their result to any increasing law invariant objective function without condition on the sign of the correlation. In...

The assessment of portfolio risk is often explicitly (e.g., the square root formula under Basel III) or implicitly (e.g., credit risk portfolio models) driven by the marginal distributions of the risky components and the correlations amongst them. We assess the extent by which such practice is...

The increase in trading frequency of Exchanged Traded Funds (ETFs) presents a positive externality for financial risk management when the price of the ETF is available at a higher frequency than the price of the component stocks. The positive spillover consists in improving the accuracy of...

We investigate the influence of the dependence between random losses on the shortfall and on the diversification benefit that arises from merging these losses.We prove that increasing the dependence between losses, expressed in terms of correlation order, has an increasing effect on the...

We apply univariate GARCH models to construct a computationally simple filter for estimating the conditional correlation matrix of asset returns. The proposed Variance Implied Conditional Correlation (VICC) exploits the polarization result that links the correlation between two standardized...