For a given time horizon ∆T , this article explores the relationship between the realized volatility (the volatility that will occur between t and t + ∆T ), the implied volatility (corresponding to at-the-money option with expiry at t+∆T ), and several forecasts for the volatility build from multi-scales linear ARCH processes. The forecasts are derived from the process equations, and the parame...

The following is a summary of governance developments over the past year in select global capital markets. Included in the review are interviews with good governance advocates and observers detailing the impact of recent regulatory changes and governance trends in Hong Kong, Switzerland, and Turkey. A review of governance developments in major capital markets including the United Kingdom, Canad...

Endowing robots with the capability of assessing risk and making risk-aware decisions is widely considered a key step toward ensuring safety for robots operating under uncertainty. But, how should a robot quantify risk? A natural and common approach is to consider the framework whereby costs are assigned to stochastic outcomes - an assignment captured by a cost random variable. Quantifying risk...

This paper proposes several parametric models to compute the portfolio VaR and CVaR in a given temporal horizon and for a given level of confidence. Firstly, we describe extension of the EWMA RiskMetrics model considering conditional elliptically distributed returns. Secondly, we examine several new models based on different stable Paretian distributional hypotheses of return portfolios. Finall...

We analyze the predictive performance of various volatility models for stock returns. To compare their performance, we choose loss functions for which volatility estimation is of paramount importance. We deal with two economic loss functions (an option pricing function and an utility function) and two statistical loss functions (a goodness-of-fit measure for a Value-at-Risk (VaR) calculation an...

We present the basic concepts used in market risk evaluations, as well as the standard methodologies to compute quantitatively the risk. A new methodology is introduced with the goal to incorporate the state-of-the-art knowledge about financial time series. The performance evaluation of risk methodologies is explained, and the performance measures of the main risk methodologies are compared. Th...