Special Issue "Financial Risk Modeling and Forecasting"

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A special issue of Journal of Risk and Financial Management (ISSN 1911-8074).

Deadline for manuscript submissions: closed (28 February 2015)

Special Issue Editors

Guest Editor
Prof. Dr. Sheri Markose (Website)

Economics Department, University of Essex, Wivenhoe Park, Colchester C04 3SQ , Essex, United Kingdom
Interests: financial networks; systemic risk modeling; extreme market events; computational simulators for market and policy design
Guest Editor
Prof. Dr. Lars Stentoft (Website)

Department of Economics, University of Western Ontario, Social Science Centre Room 4071, London, Ontario, Canada, N6A 5C2
Phone: 519-661-2111
Interests: finance; financial econometrics; computational finance; econometrics

Special Issue Information

Dear Colleagues,

The financial crisis of 2007-2009 is considered by many economists to be the worst crisis since the Great Depression of the 1930s. While the proximate origin of the crisis was arguably the bursting of the US housing bubble, it had worldwide repercussions and the global recession that followed has spurred a heated debate concerning its causes.

Poor risk management has been highlighted to be one of the factors as to why the crisis took on the magnitude that it did. With the failure of standard volatility and Value at Risk (VaR) based single asset and/or portfolio risk management, should multivariate regime-sensitive approaches, instead, be recommended in the determination of risk measures and risk management?

Moreover, there are failures in extant risk measures to price negative externalities and endogenous risk such as liquidity funding risk, model risk and counterparty risk from interconnectedness. Indeed, can a meaningful distinction be made between micro- and macro-prudential risk management?

Finally, the so called volatility paradox which signals low volatility and correlation measures during market booms may have encouraged procyclical leverage and risk taking which exacerbate market downturns and worsen financial crises. More generally, realizing that market price systemic risk measures such as Co-VaR and Marginal Expected Shortfall have been found to have little or no early warning capabilities, how should risk be forecasted?

This special issue focuses on new thinking and approaches needed to address the shortfalls that have been observed in the aftermath of the 2007 financial crisis on modelling and forecasting financial risk. Among the general topics of research to be considered in this area are:

  1. Identification, estimation and forecasting of higher order risks and risk premia for extreme financial events.
  2. Multivariate financial models, multivariate risk measures and forecasting.
  3. Regime-sensitive risk measures.
  4. Incorporation of the Volatility Paradox in risk measures.
  5. Can distinctions be drawn between micro- and macro-prudential risk management?
  6. Systemic risk and Interconnectedness.
  7. Failure of market-price-based risk measures for yielding early warning signals.

Professor Sheri Markose
Professor Lars Stentoft
Guest Editors

Submission

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. Papers will be published continuously (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are refereed through a peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Journal of Risk and Financial Management is an international peer-reviewed Open Access quarterly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. For the first couple of issues the Article Processing Charge (APC) will be waived for well-prepared manuscripts. English correction and/or formatting fees of 250 CHF (Swiss Francs) will be charged in certain cases for those articles accepted for publication that require extensive additional formatting and/or English corrections.


Published Papers (2 papers)

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Research

Open AccessArticle Volatility Forecast in Crises and Expansions
J. Risk Financial Manag. 2015, 8(3), 311-336; doi:10.3390/jrfm8030311
Received: 26 February 2015 / Revised: 30 May 2015 / Accepted: 6 July 2015 / Published: 5 August 2015
PDF Full-text (1066 KB) | HTML Full-text | XML Full-text
Abstract
We build a discrete-time non-linear model for volatility forecasting purposes. This model belongs to the class of threshold-autoregressive models, where changes in regimes are governed by past returns. The ability to capture changes in volatility regimes and using more accurate volatility measures [...] Read more.
We build a discrete-time non-linear model for volatility forecasting purposes. This model belongs to the class of threshold-autoregressive models, where changes in regimes are governed by past returns. The ability to capture changes in volatility regimes and using more accurate volatility measures allow outperforming other benchmark models, such as linear heterogeneous autoregressive model and GARCH specifications. Finally, we show how to derive closed-form expression for multiple-step-ahead forecasting by exploiting information about the conditional distribution of returns. Full article
(This article belongs to the Special Issue Financial Risk Modeling and Forecasting)
Open AccessArticle Interconnected Risk Contributions: A Heavy-Tail Approach to Analyze U.S. Financial Sectors
J. Risk Financial Manag. 2015, 8(2), 198-226; doi:10.3390/jrfm8020198
Received: 8 July 2014 / Revised: 27 February 2015 / Accepted: 17 March 2015 / Published: 7 April 2015
Cited by 1 | PDF Full-text (918 KB) | HTML Full-text | XML Full-text
Abstract
This paper investigates the dynamic evolution of tail risk interdependence among U.S. banks, financial services and insurance sectors. Life and non-life insurers have been considered separately to account for their different characteristics. The tail risk interdependence measurement framework relies on the multivariate [...] Read more.
This paper investigates the dynamic evolution of tail risk interdependence among U.S. banks, financial services and insurance sectors. Life and non-life insurers have been considered separately to account for their different characteristics. The tail risk interdependence measurement framework relies on the multivariate Student-t Markov switching (MS) model and the multiple-conditional value-at-risk (CoVaR) (conditional expected shortfall (CoES)) risk measures introduced in Bernardi et al. (2013), accounting for both the stylized facts of financial data and the contemporaneous multiple joint distress events. The Shapley value methodology is then applied to compose the puzzle of individual risk attributions, providing a synthetic measure of tail interdependence. Our empirical investigation finds that banks appear to contribute more to the tail risk evolution of all of the remaining sectors, followed by the financial services and the insurance sectors, showing that the insurance sector significantly contributes as well to the overall risk. We also find that the role of each sector in contributing to other sectors’ distress evolves over time according to the current predominant financial condition, implying different interdependence strength. Full article
(This article belongs to the Special Issue Financial Risk Modeling and Forecasting)

Planned Papers

The below list represents only planned manuscripts. Some of these manuscripts have not been received by the Editorial Office yet. Papers submitted to MDPI journals are subject to peer-review.

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