An important aspect of portfolio risk management is the analysis of the overall risk with respect to the assets' allocations. Marginal risk is the traditional tool, however, this metric is only meaningful when a position is levered or when the proceeds from the sale of a position are put in the...

This book provides a comprehensive treatment of all the steps of asset allocation: detecting the market invariants; estimating the invariants' distribution; modeling the market at any horizon; defining optimality; accounting for estimation- and model-risk; including the practitioner's experience...

While it is often argued that allocation decisions can be best expressed in terms of exposure to rewarded risk factors, as opposed to somewhat arbitrary asset class decompositions, the practical implications of this paradigm shift for the optimal design of the policy portfolio still remain...

Financial risk managers routinely use non-linear time series models to predict the downside risk of the capital under management. They also need to evaluate the adequacy of their model using so-called backtesting procedures. The latter involve hypothesis testing and evaluation of loss functions....

We study the impact of parameter and model uncertainty on the left-tail of predictive densities and in particular on VaR forecasts. To this end, we evaluate the predictive performance of several GARCH-type models estimated via Bayesian and maximum likelihood techniques. In addition to individual...