Advances in Risk Management

TARAS BELETSKI PhD Student in Financial Mathematics and a Member of the Graduate Research Training Programme Mathematics and Practise, University of Kaiserlautern, Germany OLHA BODNAR Research Assistant at the Department of Statistics, European University Viadrina, Germany EMANUELE BORGONOVO Assistant Professor in the Department of Quantitative Methods at Bocconi University, Italy RICCARDO BRAMANTE Professor of Economic Statistics at Milan Catholic University, Italy RACHEL CAMPBELL Assistant Professor of Finance at the University of Maastricht, The Netherlands ALAIN CHARBONNEAU Professor of Mathematics and Numerical Methods in the Department of Computer Sciences at the Université du Québec en Outaouais, Canada F. J. CHULIA HELENA CHULIÁ Researcher at the University of Valencia, Spain F.J. CLIMENT FABIEN COUDERC Member of the Research Team at RiskMetrics Group, Geneva Office, Switzerland JEAN-DAVID FERMANIAN Head of Risk at Cooperneff AM, USA GIAMPAOLO GABBI Professor of Banking and ofRisk Management, University of Siena, Head of the Financial Areas of Masters in Economics of the University of Siena, Senior Teacher at SDA Bocconi, Milan, Italy HAYETTE GATFAOUI Associate Professor at Rouen Graduate School of Management, France MOHAMMED SBAI IXIS Student in the Ecole Nationale des Ponts et Chaussées, currently working in IXIS Corporate and Investment Bank, France STEPHEN JEWSON Manages a group at Risk Management Solutions, London, UK. KEES KOEDIJK Full Professor, Department of Financial Management, Erasmus University Rotterdam, The Netherlands. RALF KORN Professor for Financial Mathematics and Stochastic Control at the University of Kaiserlautern, Germany ANNICK LAMBERT Professor of Statistics at the Université du Québec en Outaouais, Canada MANUEL MORENO Assistant Professor of Financial Economics and Accounting at Universidad Pompeu Fabra of Barcelona, Spain. ABDELJALIL EL MOUSSADEK MSc in Applied Finance, L'École des Sciences de la Gestion, Université du Québec, Canada JEAN-PAUL PAQUIN Teaches Project Financial Evaluation at the Université du Québec, Canada and Associated Professor and Researcher at ISMANS, France MARCO PERCOCO Research Fellow in the Department of Economics at Bocconi University, Italy IGOR POUCHKAREV Department of Finance, Faculty of Economics, Erasmus University, Rotterdam, The Netherlands AMIYATOSH PURNANANDAM Assistant Professor of Finance, Stephen M. Ross School of Business, University of Michigan, USA OLIVIER RENAULT Vice President in the Fixed Income Quantitative Research team of Citigroup Global Markets, London, UK PIERRE ROSTAN Professor of Finance at Audencia Nantes, France OLIVIER SCAILLET Professor of Probability and Statistics at HEC Genève and FAME PILAR SORIANO Researcher at the University of Valencia, Spain JAAP SPRONK Vice-Dean International New Business Development Director, Bachelor and Master Programmes in Economics, and Professor of Finance and Investment, Erasmus University, Rotterdam, The Netherlands RAYMOND THÉORET Professor of Finance at L'École des Sciences de la Gestion, Université du Québec, Canada HIPÒLIT TORRÓ Professor of Finance in the Department of Financial Economics at the University of Valencia, Spain JUAN E. TRINIDAD MITCH WARACHKA Assistant Professor in the Lee Kong Chian School of Business at the Singapore Management University YONGGAN ZHAO Assistant Professor of Finance, Nanyang Technological University, Singapore WILLIAM T. ZIEMBA Alumni Professor of Financial Modeling and Stochastic Optimization, Emeritus in the Sauder School of Business, University of British Columbia, Canada.

• Acknowledgements Notes on the Contributors Introduction Optimal Determination of the Collection Threshold for Operational Losses; Y. Crama, G. Hübner and J. Peters Incorporating Diversification into Risk Management; A. Purnanandam, M. Warachka, Y. Zhao, and W. T. Ziemba Sensitivity Analysis of Portfolio Volatility: Importance of Weights, Sectors and Impact of Trading Strategies; E. Borgonovo and M. Percoco Managing Interest Rate Risk under Non-Parallel Changes: An Application of a Two-Factor Model; M. Moreno An Essay on Stochastic Volatility and the Yield Curve; R. Théoret, P. Rostan and A. El-Moussadek Idiosyncratic Risk, Systematic Risk and Stochastic Volatility: An Implementation of Merton's Credit Risk Valuation; H. Gatfaoui A Comparative Analysis of Dependence Levels in Intensity-Based and Merton-style Credit Risk Models; J. Fermanian and M. Sbai The Modeling of Weather Derivative Portfolio Risk; S. Jewson Optimal Investment with Inflation-linked Products; T. Beletski and R. KornModel Risk and Financial Derivatives; F. Lhabitant Evaluating Value-at-risk Estimates: A Cross-section Approach; R. Zenti, M. Pallotta , and C. Marsala Correlation Breakdowns and the Impact for Asset Management; R. Bramante and G. Gabbi Sequential Procedures for Monitoring Covariance's of Asset Returns; O. Bodnar An Empirical Study of Time-Varying Return Correlations and Efficient Set of Portfolios; T. Jithendranathan The Derivation of the NPV Probability Distribution of Risky Investments with Autoregressive Cash Flows; J. Paquin, A. Lambert , and A. Charbonneau Have Volatility Transmission Patterns between Spain and USA changed after September 11?; H. Chuliá, F.J. Climent, P. Soriano , and H. Torró Large and Small Cap Stocks in Europe: Covariance Asymmetry, Volatility Spillovers and Beta Estimates; H. Chuliá and H. Torró On Model Selection and its Impact on the Hedging of Financial Derivatives; G. Di Graziano and S. Galluccio Index