Abstract
Since the beginning of the decade, the frequency and impact of financial crises have gained magnitude continuously. As a consequence, research in the field of extreme risks has enjoyed prioritization in the field of risk management (for example Chou et al., 2005; Malevergne et al., 2005; Capiello et al., 2006; Gelagati et al., 2006; Xie et al., 2006; Colacito et al., 2009; Karandikar et al., 2009). Today, the primary goal for institutions and investors has shifted to ensuring long-term survival in the financial markets before business.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Bacry Emmanuel, DelourJ., MuzyJean-François (2001), “A Multifractal Random Walk”, Physical Review, No. E, Vol. 64, No. 2.
Bacry Emmanuel, Muzy Jean-François (2004), “Des Cascades Infiniment Divisibles Multifractales”, Working Paper, Ecole Polytechnique Paris.
Billio M., Caporin M. (2005), “Multivariate Markov Switching Dynamic Conditional Correlation GARCH Representations for Contagion Analysis”, Working Paper N. 05.02, GRETA, Italy.
Billio M., Caporin M., Gobbo M. (2006), “Flexible Dynamic Conditional Correlation Multivariate GARCH Models for Asset Allocation”, Applied Financial Economics Letters, Vol. 2, No. 2, pp. 123–130.
Billio M., Caporin M. (2006), “A Generalized Dynamic Conditional Correlation Model for Portfolio Risk Evaluation”, Mathematics and Computers in Simulation, Vol. 79, No. 8, pp. 2566–2578.
Bouhaud J.P., Potters M., Meyer M. (2000), “Apparent Multifractality in Financial Time Series”, European Physical Journal, Vol. B, No. 13, pp. 595–599.
Calvet Laurent, Fisher Adlai (2004), “How to Forecast Long Run Volatility — Regime Switching and the Estimation of Multifractal Processes”, Journal of Financial Econometrics, Vol. 2, No. 1, pp. 49–83.
Calvet Laurent, Fisher Adlai, Thompson Samuel B. (2006), “Volatility Comovement — A Multifrequency Approach”, Journal of Econometrics, Vol. 131, No. 1–2, pp. 179–215.
Capiello Lorenzo, Engle Robert F., Sheppard Kevin (2006), “Asymmetric Dynamics in Correlations”, Journal of Financial Econometrics, Vol. 4, No. 4, pp. 537–572.
Chou Ray Yeutien, (2005), “Forecasting Financial Volatilites with Extreme Values: The Conditional Autoregressive Range (CARR) Model”, Journal of Money, Credit and Banking, Vol. 37, No. 3, pp. 561–581.
Colacito Riccardo, Engle Robert F., Ghysels Eric (2009), “A Component Model for Dynamic Correlations”, Journal of Business and Statistics, Vol. 24, No. 2, pp. 238–253.
Drost C. Feike, Nijman E. Theo (1993), “Temporal Aggregation of GARCH Processes”, Econometrica, No. 4, pp. 909–927.
Fernandez Viviana (2005), “The CAPM and Value at Risk at Different Time-Scales”, International Review of Financial Analysis, Vol. 15, No. 3, pp. 203–219.
Gallegati Mauro, Keen Steve, Lux Thomas, Omerod Paul (2006), “Worrying Trends in Econophysics”, Physica A, Vol. 370, pp. 1–6.
He Kaijian, Xie Chi, Chen Shou, Lai Kin Keung (2009), “Estimating VaR in Crude Oil Market — A Novel Multi-Scale, Non-Linear Ensemble Approach Incorporating Wavelet Analysis & Neural Networks”, Neurocomputing, Vol. 72, No. 16–18, pp. 3428–3438.
Idier Julien (2008), “Long term vs Short Term CoMovements in Stock Markets — The Use of Markov-Switching Multifractal Models”, Working Paper, Banque de France & Université de Paris 1.
Idier Julien (2009), ‘(Re)correlation — a Markov Switching Multifractal Model with Time-Varying Correlations’, Working Paper, Banque de France & Université de Paris 1.
Kantelhardt J.W., Yschiegner S.A., Koscielny-Bunde E., Havlin A., Stanley H. E. (2002), “Multifractal Detrended Fluctuation Analysis for Nonstationary Time Series”, Physica A: Statistical Mechanics and its Applications, Vol. 316, No. 1–4, pp. 87–114.
Karandikar R.G., Deshpande N.R., Khaparde S.A., Kulkarni S.V. (2009), “Modelling Volatility Clusters in Electricity Price Return Series for Forecasting VaR”, European Transactions on Electrical Power, Vol. 13, No. 1, pp. 15–38.
Lim Churlzu, Sherali Hanif D., Uryasev Stan, (2007), “Portfolio Optimisation by Minimizing CVaR via Nondifferentiable Optimization”, Computational Optimization and Its Applications, Vol. 46, No. 3, pp. 391–415.
Liu Ruipeng, Matteo di T., Lux Thomas (2008), “Multifractality and Long-Range Dependence of Asset Returns — The Scaling Behaviour of the Markov-Switching Multifractal Model with Lognormal Volatility Components”, Advances in Complex Systems, Vol. 11, No. 5, pp. 669–684.
Lux Thomas (2003), “The Multi-Fractal Model of Asset Returns — Its Estimation via GMM and Its Use for Volatility Forecasting”, Economics Working Paper. No 2003-13, University of Kiel, Germany.
Lux Thomas (2008), “The Markov-Switching Multifractal Model of Asset Returns — GMM Estimation and Linear Forecasting of Volatility”, Working Paper 06–19, University of Kiel, Germany.
Maheu John M., McCurdy Thomas H. (2009), “Do High-Frequency Measures of Volatility Improve Forecasts of Return Distributions”, Working Paper 19–09, University of Toronto.
Malevergne Y., Sornette D. (2005) 1st Edition, Extreme Financial Risks — From Dependence to Risk Management. Springer.
Mandelbrot Benoît, van Ness John W. (1968), “Fractional Brownian Motions, Fractional Noises and Applications”, SIAM Review, No. 10, pp. 422–437.
Mandelbrot Benoît, Calvet Laurent, Fisher Adlai (1997), “A Multifractal Model of Asset Returns”, Cowles Foundation Discussion Paper No. 1164; Sauder School of Business Working Paper, Yale University.
Peters Edgar. E. (1994), Fractal Market Analysis: Applying Chaos Theory to Investments and Economics. John Wiley & Sons, UK.
Rockafellar R. Tyrell, Uryasev Stanislav, (2000), “Optimization of Conditional Value at Risk”, Journal of Risk, Vol. 2, No. 3, pp. 21–42.
Theodossiou Panayiotis (1998), “Financial Data and the Skewed Generalized T Distribution”. Management Science, Vol. 44, No. 12, Part 1 of 2, pp. 1650–1661.
Theodossiou Panayiotis, Bali Turan (2008), “Risk Measurement Performance of Alternative Distribution Functions”. Journal of Risk & Insurance, Vol. 75, No. 2, pp. 411–437.
Xie Chi, He Kai-jian (2006), “Wavelet Denoised Value at Risk Estimate”, Management Science and Engineering, Vol. 2006, No. 5–7, pp. 1552–1557. 161–175
Editor information
Editors and Affiliations
Copyright information
© 2013 Falk Laube and Virginie Terraza
About this chapter
Cite this chapter
Laube, F., Terraza, V. (2013). The Hazard-Adjusted Portfolio: A New Capital Allocation Scheme from an Extreme-Risk Management Perspective. In: Terraza, V., Razafitombo, H. (eds) Understanding Investment Funds. Palgrave Macmillan, London. https://doi.org/10.1057/9781137273611_7
Download citation
DOI: https://doi.org/10.1057/9781137273611_7
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-44533-2
Online ISBN: 978-1-137-27361-1
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)