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Conditional Value (conditional + value)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	100%

Selected Abstracts

Hedging and value at risk: A semi-parametric approach

THE JOURNAL OF FUTURES MARKETS, Issue 8 2010
Zhiguang Cao
The non-normality of financial asset returns has important implications for hedging. In particular, in contrast with the unambiguous effect that minimum-variance hedging has on the standard deviation, it can actually increase the negative skewness and kurtosis of hedge portfolio returns. Thus, the reduction in Value at Risk (VaR) and Conditional Value at Risk (CVaR) that minimum-variance hedging generates can be significantly lower than the reduction in standard deviation. In this study, we provide a new, semi-parametric method of estimating minimum-VaR and minimum-CVaR hedge ratios based on the Cornish-Fisher expansion of the quantile of the hedged portfolio return distribution. Using spot and futures returns for the FTSE 100, FTSE 250, and FTSE Small Cap equity indices, the Euro/US Dollar exchange rate, and Brent crude oil, we find that the semiparametric approach is superior to the standard minimum-variance approach, and to the nonparametric approach of Harris and Shen (2006). In particular, it provides a greater reduction in both negative skewness and excess kurtosis, and consequently generates hedge portfolios that in most cases have lower VaR and CVaR. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 30:780,794, 2010 [source]

Measuring and Optimizing Portfolio Credit Risk: A Copula-based Approach,

ECONOMIC NOTES, Issue 3 2004
Annalisa Di Clemente
In this work, we present a methodology for measuring and optimizing the credit risk of a loan portfolio taking into account the non-normality of the credit loss distribution. In particular, we aim at modelling accurately joint default events for credit assets. In order to achieve this goal, we build the loss distribution of the loan portfolio by Monte Carlo simulation. The times until default of each obligor in portfolio are simulated following a copula-based approach. In particular, we study four different types of dependence structure for the credit assets in portfolio: the Gaussian copula, the Student's t-copula, the grouped t-copula and the Clayton n-copula (or Cook,Johnson copula). Our aim is to assess the impact of each type of copula on the value of different portfolio risk measures, such as expected loss, maximum loss, credit value at risk and expected shortfall. In addition, we want to verify whether and how the optimal portfolio composition may change utilizing various types of copula for describing the default dependence structure. In order to optimize portfolio credit risk, we minimize the conditional value at risk, a risk measure both relevant and tractable, by solving a simple linear programming problem subject to the traditional constraints of balance, portfolio expected return and trading. The outcomes, in terms of optimal portfolio compositions, obtained assuming different default dependence structures are compared with each other. The solution of the risk minimization problem may suggest us how to restructure the inefficient loan portfolios in order to obtain their best risk/return profile. In the absence of a developed secondary market for loans, we may follow the investment strategies indicated by the solution vector by utilizing credit default swaps. [source]

Comparing the perceived value of information and entertainment mobile services

PSYCHOLOGY & MARKETING, Issue 8 2008
Minna Pihlström
The importance of perceived value in customer decision making is well known. However, few studies assess empirically the direct effects of various perceived value dimensions on post-purchase behavior. This article examines differences between information and entertainment mobile content service users in how their value perceptions influence intentions to repurchase, intentions to spread positive word of mouth, and willingness to pay a price premium. The direct effects of four value dimensions are analyzed: monetary, convenience, emotional, and social value. Within this study we also propose and test the antecedent effects of conditional and epistemic value. This approach advances the value literature through increasing our understanding of how individual value dimensions influence post-purchase behavior and of the role of epistemic and conditional value. Using a sample of 579 mobile service users, results are analyzed with multi-group structural equation modeling. The findings support use of multidimensional value and loyalty constructs to identify differences between service user groups, and argue for the use of differentiated value-based marketing strategies for entertainment and information mobile services. © 2008 Wiley Periodicals, Inc. [source]

Asymmetric hedging of the corporate terms of trade

THE JOURNAL OF FUTURES MARKETS, Issue 11 2006
Roger Bowden
Risk management techniques such as value at risk and conditional value at risk focus attention on protecting the downside exposures without penalizing the upside exposures. The implied welfare functions are equivalent to an otherwise risk neutral agent with a put option exposure on the downside. The correspondence can be exploited to design smoother loss measures and numerically based solutions for optimal hedge ratios. A statistically well-adapted hedge object for the firm is the corporate terms of trade, which balances up output and expense prices as a single index related to the net profit margin. The methods are applied to the NZ dairy industry to derive optimal foreign exchange forwards based hedges. It is not always optimal to rely solely on forward discounts or premiums. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:1059,1088, 2006 [source]

Hedging and value at risk

THE JOURNAL OF FUTURES MARKETS, Issue 4 2006
Richard D. F. Harris
In this article, it is shown that although minimum-variance hedging unambiguously reduces the standard deviation of portfolio returns, it can increase both left skewness and kurtosis; consequently the effectiveness of hedging in terms of value at risk (VaR) and conditional value at risk (CVaR) is uncertain. The reduction in daily standard deviation is compared with the reduction in 1-day 99% VaR and CVaR for 20 cross-hedged currency portfolios with the use of historical simulation. On average, minimum-variance hedging reduces both VaR and CVaR by about 80% of the reduction in standard deviation. Also investigated, as an alternative to minimum-variance hedging, are minimum-VaR and minimum-CVaR hedging strategies that minimize the historical-simulation VaR and CVaR of the hedge portfolio, respectively. The in-sample results suggest that in terms of VaR and CVaR reduction, minimum-VaR and minimum-CVaR hedging can potentially yield small but consistent improvements over minimum-variance hedging. The out-of-sample results are more mixed, although there is a small improvement for minimum-VaR hedging for the majority of the currencies considered. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:369,390, 2006 [source]