Momentum profits, non-normality risks and the business cycle

This paper investigates the extent to which the profitability of momentum strategies is a compensation for exposure to systematic departures from normality. We document that winner returns are more negatively skewed than loser returns, and that the winners exhibit higher positive kurtosis than the losers.

Updated: 24/10/2011
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Views: 3,879

The third annual Cass-Capco conference of the Cass-Capco institute paper series on risk

Author(s):

Podcast containing interviews, presentations and keynote address of the event at Cass Business School on 19 April 2010

Updated: 30/09/2011
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Views: 8,740

Developing a risk rating methodology

This report provides the guidelines necessary for standardising the measurement of risk so that it can be applied to make meaningful comparisons between one fund and another.

Updated: 03/11/2011
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Views: 13,213

Insurance solvency under parameter uncertainty

Financial institutions such as insurance companies or banks are regulated according to a Value-at-Risk principle. This means that they have to hold enough capital, such that their probability of becoming insolvent over a fixed time horizon (e.g. 1 year) is very low (e.g. at most 0.5%). Calculation of the required capital according to this principle stumbles on the quite fundamental difficulty of estimating the probability of very extreme scenarios based on limited data sets.

Updated: 22/09/2011
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Views: 8,547

Stochastic claims reserving in general insurance

Claims reserves are held by insurance companies so that they have sufficient funds to pay claims when they are submitted by policyholders. In general insurance, insurance policies usually last for a year; the policyholder pays an upfront premium and then expects any claims to be met - no matter when they are made. The problem for insurers is that there is often a delay before the claims are arrive, and then a further delay before they are paid.

Updated: 24/01/2013
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Views: 15,128

Stochastic claims reserving in general insurance

Claims reserves are held by insurance companies so that they have sufficient funds to pay claims when they are submitted by policyholders. In general insurance, insurance policies usually last for a year; the policyholder pays an upfront premium and then expects any claims to be met - no matter when they are made. The problem for insurers is that there is often a delay before the claims are arrive, and then a further delay before they are paid.

Updated: 24/01/2013
Comments:
Views: 15,128

Prospective utility and time-varying optimal asset allocation for the UK: 1803-1995

Author(s):

Stephen Thomas

In this talk, Professor Thomas re-examines one approach based on myopic loss aversion, while incorporating time variation in returns distributions.

Updated: 06/03/2012
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Views: 5,854

Risk management before and after the Credit Crunch: how will the crisis change the theory and the practice of investment risk management?

Some risk models failed badly during the credit crunch. Numerous commentators, including Lord Turner in his March 2009 Review, have raised fundamental questions about the validity of Value at Risk (VaR) as a measure of risk. This talk reviews the lessons from the credit crunch. Not all models performed badly but many did, and for a variety of different reasons.

Updated: 06/03/2012
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Views: 6,611

To split or not to split: capital allocation with convex risk measures

Convex risk measures were introduced by Deprez and Gerber (1985). Here the problem of allocating risk capital to subportfolios is addressed, when aggregate capital is calculated by a convex risk measure. The Aumann-Shapley value is proposed as an appropriate allocation mechanism. Distortion-exponential measures are discussed extensively and explicit capital allocation formulas are obtained for the case that the risk measure belongs to this family. Finally the implications of capital allocation with a convex risk measure for the stability of portfolios are discussed.

Updated: 22/09/2011
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Views: 3,903