Risks, Volume 5, Issue 3

Value-at-Risk (VaR) is a well-accepted risk metric in modern quantitative risk management (QRM). The classical Monte Carlo simulation (MCS) approach, denoted henceforth as the classical approach, assumes the independence of loss severity and loss fre...

For evaluating the probabilities of arbitrary random events with respect to a given multivariate probability distribution, specific techniques are of great interest. An important two-dimensional high risk limit law is the Gauss-exponential distributi...

Measuring interdependence between probabilities of default (PDs) in different industry sectors of an economy plays a crucial role in financial stress testing. Thereby, regression approaches may be employed to model the impact of stressed industry sec...

This paper provides a complete program for the valuation of aggregate non-life insurance liability cash flows based on claims triangle data. The valuation is fully consistent with the principle of valuation by considering the costs associated with a...

In this paper we develop a well-established financial model to investigate whether bubbles were present in opinion polls and betting markets prior to the UK’s vote on EU membership on 23 June 2016. The importance of our contribution is threefold. Fir...

This paper proposes a model-free approach to hedging and pricing in the presence of market imperfections such as market incompleteness and frictions. The generality of this framework allows us to conduct an in-depth theoretical analysis of hedging st...

Much of the debate around a potential British exit (Brexit) from the European Union has centred on the potential macroeconomic impact. In this paper, we instead focus on understanding market expectations for price action around the Brexit referendum...

This work proposes a backtesting analysis that compares the Lee–Carter and the Cairns–Blake–Dowd mortality models, employing Italian data. The mortality data come from the Italian National Statistics Institute (ISTAT) database and span the period 197...

Pareto processes are suitable to model stationary heavy-tailed data. Here, we consider the auto-regressive Gaver–Lewis Pareto Process and address a study of the tail behavior. We characterize its local and long-range dependence. We will see that cons...