Search results for "Risk measure"

2014

This paper presents a mathematical model for robust production planning. The model helps fashion apparel suppliers in making decisions concerning allocation of production orders to different production plants characterized by different lead times and production costs, and in proper time scheduling and sequencing of these production orders. The model aims at optimizing these decisions concerning objectives of minimal production costs and minimal tardiness. It considers several factors such as the stochastic nature of customer demand, differences in production and transport costs and transport times between production plants in different regions. Finally, the model is applied to a case study.…

Fuzzy portfolio optimization under downside risk measures

2007

This paper presents two fuzzy portfolio selection models where the objective is to minimize the downside risk constrained by a given expected return. We assume that the rates of returns on securities are approximated as LR-fuzzy numbers of the same shape, and that the expected return and risk are evaluated by interval-valued means. We establish the relationship between those mean-interval definitions for a given fuzzy portfolio by using suitable ordering relations. Finally, we formulate the portfolio selection problem as a linear program when the returns on the assets are of trapezoidal form.

A computational proposal for a robust estimation of the Pareto tail index: An application to emerging markets

2022

Abstract In this work, we backtest and compare, under the VaR risk measure, the fitting performances of three classes of density distributions (Gaussian, Stable and Pareto) with respect to three different types of emerging markets: Egypt, Qatar and Mexico. We also propose a new technique for the estimation of the Pareto tail index by means of the Threshold Accepting (TAVaR) and the Hybrid Particle Swarm Optimization algorithm (H-PSOVaR). Furthermore, we test the accuracy and robustness of our estimates demonstrating the effectiveness of the proposed approach.

Portfolio performance evaluation with loss aversion

2011

In this paper we consider a loss-averse investor equipped with a specific, but still quite general, utility function motivated by behavioral finance. We show that, under certain concrete assumptions concerning the form of this utility, one can derive closed-form solutions for the investor's portfolio performance measure. We investigate the effects of loss aversion and demonstrate its important role in performance measurement. The framework presented in this paper also provides a sound theoretical foundation for all known performance measures based on partial moments of the distribution.

Optimal Dynamic Portfolio Risk Management

2016

Numerous econometric studies report that financial asset volatilities and correlations are time-varying and predictable. Over the past decade, this knowledge has stimulated increasing interest in various dynamic portfolio risk control techniques. The two basic types of risk control techniques are: risk control across assets and risk control over time. At present, the two types of risk control techniques are not implemented simultaneously. There has been surprisingly little theoretical study of optimal dynamic portfolio risk management. In this paper, the author fills this gap in the literature by formulating and solving the multi-period portfolio choice problem. In terms of dynamic portfoli…

A Generalization of the Mean-Variance Analysis

2008

In this paper we consider a decision maker whose utility function has a kink at the reference point with different functions below and above this reference point. We also suppose that the decision maker generally distorts the objective probabilities. First we show that the expected utility function of this decision maker can be approximated by a function of mean and partial moments of distribution. This "mean-partial moments" utility generalizes not only the mean-variance utility of Tobin and Markowitz, but also the mean-semivariance utility of Markowitz. Then, in the spirit of Arrow and Pratt, we derive an expression for a risk premium when risk is small. Our analysis shows that a decision…

Grading investment diversification options in presence of non-historical financial information

2021

Modern portfolio theory deals with the problem of selecting a portfolio of financial assets such that the expected return is maximized for a given level of risk. The forecast of the expected individual assets’ returns and risk is usually based on their historical returns. In this work, we consider a situation in which the investor has non-historical additional information that is used for the forecast of the expected returns. This implies that there is no obvious statistical risk measure any more, and it poses the problem of selecting an adequate set of diversification constraints to mitigate the risk of the selected portfolio without losing the value of the non-statistical information owne…

Selecting the best risk measure in multiobjective cash management

2018

How Banks Disclose Market Risk Information: an Empirical Analysis on a Sample of Italian Banks.

The topic of this paper is market risk reporting in banking, and its purpose is to provide a methodology to evaluate the qualitative and quantitative profiles of market risk disclosure. This methodology, based on a hybrid scoring approach, aims to assess the market risk disclosure in banking. In this paper, I use content analysis to conduct an empirical research on a sample of Italian banks. The paper provides evidences that banks differ in their market risk reporting, even though they are subject to similar regulatory requirements and accounting standards. The paper also shows that there is room to improve various aspects of market risk disclosure.

Risk Profiles for Re-Profiling the Sovereign Debt of Crisis Countries

2014

This paper uses a risk-management approach to re-profile the sovereign debt of countries facing debt crises. Using scenario analysis we develop a risk measure of the sovereign's debt -- Conditional Debt-at-Risk -- and an optimization model is used to trace risk profiles that tradeoff expected cost of debt financing against the Conditional Debt-at-Risk. The risk profiles are particularly informative for crisis countries, as they allow us to identify, with high-probability, debt unsustainability. We develop risk profiles for two Eurozone countries with excessive debt, Cyprus and Italy, both in their current form and under various forms of restructuring or rescheduling, and show how to assess …