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Advances in Risk Management (Finance and Capital Markets) by Greg N. Gregoriou

By Greg N. Gregoriou

This ebook includes an edited sequence of papers approximately chance administration and the most recent advancements within the box. masking subject matters akin to Stochastic Volatility, possibility Dynamics, climate Derivatives and Portfolio Diversification, this ebook could have large overseas charm. it's hugely relevany for optimum portfolio allocation for either deepest and institutional traders around the world.

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Example text

Since the selection criteria and perceived desirability of individual assets are highly variable across firms, very little structure is imposed on R(η). 2) where ci implicitly denotes a ranking of the assets. For example, ci may represent numerical weightings associated with strong outperform, weak outperform, or hold among other possibilities. 2) allows several variables, including expected returns and variances, to influence a portfolio’s desirability. 2) as diversification is reserved for our subsequent discussion of the proposed risk measure.

P1 (ωM ) ...  PN (ω1 ) PN (ω2 )    ..  . . PN (ωM ) A vector of portfolio holdings η = [η0 , η1 , . . , ηN ] represents the number of units, not dollar amounts or fractions of a portfolio, invested in the various assets. Portfolio values Pη in the M scenarios determine whether a portfolio complies with the demands of an external regulator. Coherent risk measures evaluate a portfolio’s risk according to its value in the worst possible scenario or under the probability measure that produces the largest negative outcome.

Coherence and completeness of collected data amongst business units is therefore crucial. Selecting the most adequate collection threshold is obviously bankspecific, as each bank will examine the tradeoff between increasing the number of observations in its internal database and the associated increase in costs. In addition to cost issues, reporting very low losses is likely to be viewed as a waste of time by the employees. When this is the case, adhesion of the employees is hard to obtain and the reliability of the collection process can be questioned.

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