Under the new regulation based on Basel solvency framework, known as Basel III and Basel IV, financial institutions must calculate the market risk capital requirements based on the Expected Shortfall (ES) measure, replacing the Value at Risk (VaR) measure. In the financial literature, there are...

This paper presents an extension of the Capital Assets Pricing Model (hereafter CAPM) where various utility functions are applied. Specifically, we propose an overall CAPM beta that accounts for the higher order moments and reflects the investor preferences and attitudes toward risk. We...

The experience of past financial market turmoil suggests that in addition to eroding investor wealth, the severe consequences of rare extreme market events can spillover and impair the broader real economies. In this context, this paper is an evaluation of the methodological and empirical...

In this paper we propose a maximum entropy estimator for the asymptotic distribution of the hedging error for options. Perfect replication of financial derivatives is not possible, due to market incompleteness and discrete-time hedging. We derive the asymptotic hedging error for options under a...

Factor modeling is a popular strategy to induce sparsity in multivariate models as they scale to higher dimensions. We develop Bayesian inference for a recently proposed latent factor copula model, which utilizes a pair copula construction to couple the variables with the latent factor. We use...

We propose a semiparametric estimator to determine the effects of explanatory variables on the conditional interquantile expectation (IQE) of the random variable of interest, without specifying the conditional distribution of the underlying random variables. IQE is the expected value of the...

A flexible framework for the analysis of tail events is proposed. The framework contains tail moment measures that allow for Expected Shortfall (ES) estimation. Connecting the implied tail thickness of a family of distributions with the quantile and expectile estimation, a platform for risk...