Financial Risk Modeling and Forecasting

Dear Colleagues,

The financial crisis of 2007-2009 is considered by many economists to be the worst crisis since the Great Depression of the 1930s. While the proximate origin of the crisis was arguably the bursting of the US housing bubble, it had worldwide repercussions and the global recession that followed has spurred a heated debate concerning its causes.

Poor risk management has been highlighted to be one of the factors as to why the crisis took on the magnitude that it did. With the failure of standard volatility and Value at Risk (VaR) based single asset and/or portfolio risk management, should multivariate regime-sensitive approaches, instead, be recommended in the determination of risk measures and risk management?

Moreover, there are failures in extant risk measures to price negative externalities and endogenous risk such as liquidity funding risk, model risk and counterparty risk from interconnectedness. Indeed, can a meaningful distinction be made between micro- and macro-prudential risk management?

Finally, the so called volatility paradox which signals low volatility and correlation measures during market booms may have encouraged procyclical leverage and risk taking which exacerbate market downturns and worsen financial crises. More generally, realizing that market price systemic risk measures such as Co-VaR and Marginal Expected Shortfall have been found to have little or no early warning capabilities, how should risk be forecasted?

This special issue focuses on new thinking and approaches needed to address the shortfalls that have been observed in the aftermath of the 2007 financial crisis on modelling and forecasting financial risk. Among the general topics of research to be considered in this area are:

1. Identification, estimation and forecasting of higher order risks and risk premia for extreme financial events.
2. Multivariate financial models, multivariate risk measures and forecasting.
3. Regime-sensitive risk measures.
4. Incorporation of the Volatility Paradox in risk measures.
5. Can distinctions be drawn between micro- and macro-prudential risk management?
6. Systemic risk and Interconnectedness.
7. Failure of market-price-based risk measures for yielding early warning signals.

Professor Sheri Markose
Professor Lars Stentoft
Guest Editors

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Journal of Risk and Financial Management is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1400 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.