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Tail Risk And Pk Tail Risk
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Book Synopsis Tail Risk and Pk-Tail Risk by : Carlos Pedro dos Santos Gonçalves
Download or read book Tail Risk and Pk-Tail Risk written by Carlos Pedro dos Santos Gonçalves and published by . This book was released on 2005 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper discusses the notion of tail risk, and the ability of a tail risk measure to reflect this kind of risk. In particular, Yamai and Yoshiba's (2001, 2002) notion of strict risk measure tail risk is discussed and linked with a different notion of tail risk, the pK-tail risk, which is the risk associated with the probability measure conditional on the event that the losses are at least as large as K. A subset of pK-tail risk measures that are free of strict risk measure tail risk is introduced. These notions are then extended to Yaari's (1987) dual theory and the distorted risk measures framework.
Book Synopsis How the Risk Measures Play Important Roles for Tail Risk Management and Diversification by : Takuo Higashide
Download or read book How the Risk Measures Play Important Roles for Tail Risk Management and Diversification written by Takuo Higashide and published by . This book was released on 2019 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the world of investment, the subject of building a portfolio concerning tail risk is still one of the frequently discussed subjects and unquestionably vital for investors. This paper seeks to examine how the risk measures, lower tail-dependence based on the copulas approach and Conditional Value-at-Risk (CVaR), affect the portfolio strategies and play important roles for tail risk management and diversify the portfolio. By using these two risk measures mentioned above, two different types of risk-based portfolios are proposed that consider for the tail risks: 1) Minimum-lower tail-dependence portfolio (RMTP) and 2) Risk Parity Portfolio based on Conditional Value-at-Risk (CRPP). The simulation results showed how those two risk-based portfolios, RMTP and CRPP, work effectively in multi-asset allocation framework with 6 assets: stocks and sovereign bonds of Japan, United States and Germany, based on the monthly rebalance rule, using 2004-2018 sample period. One of the key findings were that both RMTP and CRPP strategies delivered better performances compared with the traditional portfolio strategies in terms of sharp ratio: 1) RMTP yielded 0.92 and 2) CRPP yielded 0.99 (by adding an appropriate risk reduction to this portfolio, the sharp ratio went up to 1.76). In addition, both of these two strategies also worked effectively in terms of the average of maximum monthly drawdown related to the effect of the tail risk: 1) RMTP by 1.80% and 2) CRPP by 1.74% (by adding an appropriate risk reduction to this portfolio, maximum drawdown decreased to 0.78%). Furthermore, this paper also studies an enhancement strategy based on Risk Parity Portfolios (RPP) focusing on and using co-integration relationship (co-integration approach). According to the simulation result, this proposed enhancement strategy has a potential to yield roughly 4.5% return. Finally, this paper presents the explicit derivation of lower tail-dependence and co-integration approach.
Book Synopsis TAIL RISK HEDGING: Creating Robust Portfolios for Volatile Markets by : Vineer Bhansali
Download or read book TAIL RISK HEDGING: Creating Robust Portfolios for Volatile Markets written by Vineer Bhansali and published by McGraw Hill Professional. This book was released on 2013-12-27 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt: "TAIL RISKS" originate from the failure of mean reversion and the idealized bell curve of asset returns, which assumes that highly probable outcomes occur near the center of the curve and that unlikely occurrences, good and bad, happen rarely, if at all, at either "tail" of the curve. Ever since the global financial crisis, protecting investments against these severe tail events has become a priority for investors and money managers, but it is something Vineer Bhansali and his team at PIMCO have been doing for over a decade. In one of the first comprehensive and rigorous books ever written on tail risk hedging, he lays out a systematic approach to protecting portfolios from, and potentially benefiting from, rare yet severe market outcomes. Tail Risk Hedging is built on the author's practical experience applying macroeconomic forecasting and quantitative modeling techniques across asset markets. Using empirical data and charts, he explains the consequences of diversification failure in tail events and how to manage portfolios when this happens. He provides an easy-to-use, yet rigorous framework for protecting investment portfolios against tail risk and using tail hedging to play offense. Tail Risk Hedging explores how to: Generate profits from volatility and illiquidity during tail-risk events in equity and credit markets Buy attractively priced tail hedges that add value to a portfolio and quantify basis risk Interpret the psychology of investors in option pricing and portfolio construction Customize explicit hedges for retirement investments Hedge risk factors such as duration risk and inflation risk Managing tail risk is today's most significant development in risk management, and this thorough guide helps you access every aspect of it. With the time-tested and mathematically rigorous strategies described here, including pieces of computer code, you get access to insights to help mitigate portfolio losses in significant downturns, create explosive liquidity while unhedged participants are forced to sell, and create more aggressive yet tail-risk-focused portfolios. The book also gives you a unique, higher level view of how tail risk is related to investing in alternatives, and of derivatives such as zerocost collars and variance swaps. Volatility and tail risks are here to stay, and so should your clients' wealth when you use Tail Risk Hedging for managing portfolios. PRAISE FOR TAIL RISK HEDGING: "Managing, mitigating, and even exploiting the risk of bad times are the most important concerns in investments. Bhansali puts tail risk hedging and tail risk management under a microscope--pricing, implementation, and showing how we can fine-tune our risk exposures, which are all crucial ways in how we can better weather our bad times." -- ANDREW ANG, Ann F. Kaplan Professor of Business at Columbia University "This book is critical and accessible reading for fiduciaries, financial consultants and investors interested in both theoretical foundations and practical considerations for how to frame hedging downside risk in portfolios. It is a tremendous resource for anyone involved in asset allocation today." -- CHRISTOPHER C. GECZY, Ph.D., Academic Director, Wharton Wealth Management Initiative and Adj. Associate Professor of Finance, The Wharton School "Bhansali's book demonstrates how tail risk hedging can work, be concretely implemented, and lead to higher returns so that it is possible to have your cake and eat it too! A must read for the savvy investor." -- DIDIER SORNETTE, Professor on the Chair of Entrepreneurial Risks, ETH Zurich
Book Synopsis Measurement of Tail Risk by : Marta Mylyan
Download or read book Measurement of Tail Risk written by Marta Mylyan and published by . This book was released on 2014 with total page 110 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Tail Risk Measures and Loss Distributions by : Tomer Shushi
Download or read book Tail Risk Measures and Loss Distributions written by Tomer Shushi and published by . This book was released on 2016 with total page 110 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Tail Risk and Asset Prices by : Bryan Kelly
Download or read book Tail Risk and Asset Prices written by Bryan Kelly and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose a new measure of time-varying tail risk that is directly estimable from the cross section of returns. We exploit firm-level price crashes every month to identify common fluctuations in tail risk across stocks. Our tail measure is significantly correlated with tail risk measures extracted from S&P 500 index options, but is available for a longer sample since it is calculated from equity data. We show that tail risk has strong predictive power for aggregate market returns: A one standard deviation increase in tail risk forecasts an increase in excess market returns of 4.5% over the following year. Cross-sectionally, stocks with high loadings on past tail risk earn an annual three-factor alpha 5.4% higher than stocks with low tail risk loadings. These findings are consistent with asset pricing theories that relate equity risk premia to rare disasters or other forms of tail risk.
Book Synopsis Tail Risks Across Investment Funds by : Jerchern Lin
Download or read book Tail Risks Across Investment Funds written by Jerchern Lin and published by . This book was released on 2016 with total page 67 pages. Available in PDF, EPUB and Kindle. Book excerpt: Managed portfolios are subject to tail risks, which can be either index level (systematic) or fund-specific. Examples of fund-specific extreme events include those due to big bets or fraud. This paper studies the two components in relation to compensation structure in managed portfolios. A simple model generates fund-specific tail risk and its asymmetric dependence on the market, and makes predictions for where such risks should be concentrated. The model predicts that systematic tail risks increase with an increased weight on systematic returns in compensation and idiosyncratic tail risks increase with the degree of convexity in contracts. The model predictions are supported with empirical results. Hedge funds are subject to higher idiosyncratic tail risks and Exchange Traded Funds exhibit higher systematic tail risks. In skewness and kurtosis decompositions, I find that coskewness is an important source for fund skewness, but fund kurtosis is driven by cokurtosis, as well as volatility comovement and residual kurtosis, with the importance of these components varying across fund types. Investors are subject to different sources of skewness and fat tail risks through delegated investments. Volatility based tail risk hedging is not effective for all fund styles and types.
Book Synopsis Tail Risk and Its Predictive Power by : Muhammad Kashif
Download or read book Tail Risk and Its Predictive Power written by Muhammad Kashif and published by . This book was released on 2016-11-08 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Tail Risk Premia and Return Predictability by : Tim Bollerslev
Download or read book Tail Risk Premia and Return Predictability written by Tim Bollerslev and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Systematic Tail Risk written by Chen Zhou and published by . This book was released on 2013 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Systematic Tail Risk by : Maarten van Oordt
Download or read book Systematic Tail Risk written by Maarten van Oordt and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Specifying and Managing Tail Risk in Portfolios - A Practical Approach by : Pranay Gupta
Download or read book Specifying and Managing Tail Risk in Portfolios - A Practical Approach written by Pranay Gupta and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Tail risk arises at multiple stages in the investment management process - from the high level asset allocation decision down to the individual portfolio manager's process for selecting securities. We believe that conventional practices followed in these investment decision processes, largely ignore intra-horizon risk. We believe this leads to sub-optimal assessment of risk of assets, particularly in the context of potential tail risk, and leads to the construction of portfolios, which are not in sync with the risk aversion of the client.In the present paper we propose a composite risk measure which simultaneously captures the risk of breaching a specified maximum intra-horizon drawdown threshold, as well as the risk that the performance is not met at the end of the investment horizon. We believe this captures the 'true' risk of a portfolio, much better than traditional end of horizon risk measures.We find that intra-horizon risk can represent a substantial part of the total risk, and thus needs to be managed explicitly which constructing a portfolio of assets, strategies or asset classes. We propose that varying the investment horizon and implementing a customized stop loss for each asset can help construct a portfolio where portfolio risk is kept within bounds of tolerance, and can improve performance over time.
Book Synopsis Tail Risk and Long Memory in Financial Markets by : Duc Binh Benno Nguyen
Download or read book Tail Risk and Long Memory in Financial Markets written by Duc Binh Benno Nguyen and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A New Approach to Tail Risk by : Ana Cascon
Download or read book A New Approach to Tail Risk written by Ana Cascon and published by . This book was released on 2015 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt: One of the fundamental requirements of investment management is the ability to assess risk and to adjust exposure to control tail risk, the risk of larger than acceptable losses. Since the onset of the recent credit crisis, the effects of widespread failure of standard techniques for tail risk management have been an almost daily feature in the financial news.The most widely used approach to risk assessment by large financial institutions is the statistical tool known as Value at Risk (VaR). In fact, VaR is the risk measure commonly accepted by bank regulators in the banks' internal models for regulatory capital calculations (International Money Fund 2007). Conventional VaR and Conditional Value at Risk (CVaR) are useful, however, only if their implementation is consistent with the nature of the data. Conventional VaR and CVaR assume that data come from a normal distribution. We examine some of the failings of using this approach with tail risk in a number of examples from 2007 and 2008.To make VaR and CVaR work, it is important to correctly identify the nature of the tails that these techniques try to estimate. For this we introduce tail risk bands, a practical risk measurement tool that categorizes risk levels and identifies assets and market conditions for which conventional VaR cannot be expected to adequately represent downside risk.We illustrate our approach on daily data from equity markets and monthly data from hedge funds. In particular we show that this analysis provided warning of the riskiness of AIG, JPMorgan Chase, Lehman Brothers, the S&P 500 Index, and other equity indexes well in advance of the credit crisis. For the cases where tail risk bands indicate that the conventional VaR model cannot work, we provide a simple, easy-to-implement alternative. This is appropriate in the case of moderately heavy tails, which are common in financial data. This alternative is easily substituted for the standard approach and, as we show in a number of examples, provides a more realistic estimate of risk. We show that this can be used to make risk-adjusted comparisons of assets, using Berkshire Hathaway and JPMorgan Chase shares and the S&P 500 Index as examples. Finally, we provide evidence that during periods of unusual market turmoil only specialized techniques designed to deal with the statistics of extremes are likely to adequately assess the probability or the size of large losses.
Book Synopsis A Theory for Measures of Tail Risk by : Fangda Liu
Download or read book A Theory for Measures of Tail Risk written by Fangda Liu and published by . This book was released on 2020 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: The notion of "tail risk" has been a crucial consideration in modern risk management. To achieve a comprehensive understanding of the tail risk, we carry out an axiomatic study for risk measures which quantify the tail risk, that is, the behavior of a risk beyond a certain quantile. Such risk measures are referred to as tail risk measures in this paper. The two popular classes of regulatory risk measures in banking and insurance, the Value-at-Risk (VaR) and the Expected Shortfall (ES), are prominent, yet elementary, examples of tail risk measures. We establish a connection between a tail risk measure and a corresponding law-invariant risk measure, called its generator, and investigate their joint properties. A tail risk measure inherits many properties from its generator, but not subadditivity or convexity; nevertheless, a tail risk measure is coherent if and only if its generator is coherent. We explore further relevant issues on tail risk measures, such as bounds, distortion risk measures, risk aggregation, elicitability, and dual representations. In particular, there is no elicitable tail convex risk measure rather than the essential supremum, and under a continuity condition, the only elicitable and positively homogeneous monetary tail risk measures are the VaRs.
Book Synopsis Tail Risk Managed Investment Strategies by : Lars Rickenberg
Download or read book Tail Risk Managed Investment Strategies written by Lars Rickenberg and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Drivers of Downside Equity Tail Risk by : Kyle Moore
Download or read book The Drivers of Downside Equity Tail Risk written by Kyle Moore and published by . This book was released on 2013 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the cross-sectional differences in the tail risk of equity returns and identify the drivers of tail risk. We provide two statistical procedures to test the hypothesis of cross-sectional downside tail shape homogeneity. An empirical study of 230 US non-financial firms shows that between 2008 and 2011 the cross-sectional tail shape is homogeneous across equity returns. The heterogeneity in tail risk over this period can be entirely attributed to differences in scale. The differences in scales are driven by the following firm characteristics: market beta, size, book-to-market ratio, leverage and bid-ask spread.
