We highlight important and specific characteristics of default risk and methodological implications. In a simulation contrasting independent, Gaussian and Clayton copulas, we also show that joint default probabilities might be a hidden source of risk in conventional portfolio models of default

We try to reconcile the popular opinion that the Financial Crisis has fundamentally altered equity risk characteristics with empirical data. Our analysis based on Extreme Value Theory suggests that equity tail risks have remained remarkably stable. This means that the loss dynamics of S&P 500...

Tail risk refers to the shape of the left tail of the distribution of investment returns. Return distributions are traditionally described in terms of their first for moments: mean return, volatility, skewness and kurtosis. Attribution is a descriptive approach used in portfolio analysis to...

We discuss the widespread belief that using a higher data frequency, i.e. calculating with more observations, will lower estimation risk. For example, it is often believed that calculating annualized volatility from daily returns will be more “accurate” than calculating annualized volatility...

This paper investigates the effect of economic policy uncertainty (EPU) on gambling activity in China. Based on a theoretical model, we hypothesize that EPU increases the demand for hope which raises the willingness to pay for lottery tickets, resulting in higher lottery sales. We estimate a...

Surplus risk and return are not accounting measures but economic magnitudes. As the initial surplus can be zero, surplus return cannot be measured with the standard accounting logic in return measurement. Once surplus return is properly measured, standard risk measurement approaches can be used...

This paper investigates the effect of economic policy uncertainty (EPU) on gambling activity in China. Based on a theoretical model, we hypothesize that EPU increases the demand for hope which raises the willingness to pay for lottery tickets, resulting in higher lottery sales. We estimate a...