Journal of Risk Finance: Volume 2 Issue 1

Investing in Skews

DILIP B. MADAN, GAVIN S. MCPHAIL

Asset allocation has primarily focused its attention on attaining mean variance efficiency by employing diversification strategies following the portfolio selection methodologies…

Model‐Independent Measures of Volatility Exposure

ALVIN KURUC

The development of standardized measures of institution‐wide volatility exposures has so far lagged that for measures of asset price and interest‐rate exposure—largely because it…

Does Volatility Pay?

GIOVANNI BARONE‐ADESI

A major focus of the literature in financial economics is the predictability of excess stock returns. Variables such as interest rates and dividend yields to some degree appear to…

A Practitioner's Guide to Active Portfolio Management Using Implied View

BERNARD LEE

The Implied View of a portfolio can offer powerful insights to the savvy portfolio manager. This article presents a heuristic by which these returns can be computed, using…

Capital Requirement: A New Method Based on Extreme Price Variations

FRANÇOIS LONGIN

From a regulatory point of view, as explained by Dimson and Marsh [1994, 1995], the amount of capital required by a financial institution to ensure an acceptably small probability…

Accounting for Value at Risk in Financial Institutions' Portfolios

KEVIN DOWD

One of the most important developments in portfolio risk management in the 1990s was the increased use of Value at Risk (VaR). VaR has enjoyed a spectacular rise, from being…

Sending the Herd Off the Cliff Edge: The Disturbing Interaction Between Herding and Market‐Sensitive Risk Management Practices

AVINASH PERSAUD

In the international financial arena, G7 policymakers chant three things: more market‐sensitive risk management, stronger prudential standards, and improved transparency. The…

Efficient Risk/Return Frontiers for Credit Risk

HELMUT MAUSSER, DAN ROSEN

The risk/return trade‐off has been a central tenet of portfolio management since the seminal work of Markowitz [1952]. The basic premise, that higher (expected) returns can only…