John H.J. Einmahl, Walter N. Foppen, Olivier W. Laseroms and Casper G. de Vries
It is the purpose of this article to improve existing methods for risk management, in particular stress testing, for derivative portfolios. The method is explained and compared…
Abstract
Purpose
It is the purpose of this article to improve existing methods for risk management, in particular stress testing, for derivative portfolios. The method is explained and compared with other methods, using hypothetical portfolios.
Design/methodology/approach
Closed form option pricing formulas are used for valuation. To assess the risk, future price movements are modeled by an empirical distribution in conjunction with a semi‐parametrically estimated tail. This approach captures the non‐linearity of the portfolio risk and it is possible to estimate the extreme risk adequately.
Findings
It is found that this method gives excellent results and that it clearly outperforms the standard approach based on a quadratic approximation and the normal distribution. Especially for very high confidence levels, the improvement is dramatic.
Practical implications
In applications of this type the present method is highly preferable to the classical Delta‐Gamma cum normal distribution approach.
Originality/value
This paper uses a “statistics of extremes” approach to stress testing. With this approach it is possible to estimate the far tail of a derivative portfolio adequately.
Details
Keywords
SERGIO M. FOCARDI and FRANK J. FABOZZI
Fat‐tailed distributions have been found in many financial and economic variables ranging from forecasting returns on financial assets to modeling recovery distributions in…
Abstract
Fat‐tailed distributions have been found in many financial and economic variables ranging from forecasting returns on financial assets to modeling recovery distributions in bankruptcies. They have also been found in numerous insurance applications such as catastrophic insurance claims and in value‐at‐risk measures employed by risk managers. Financial applications include:
Francis X. Diebold, Til Schuermann and John D. Stroughair
Extreme value theory (EVT) holds promise for advancing the assessment and management of extreme financial risks. Recent literature suggests that the application of EVT generally…
Abstract
Extreme value theory (EVT) holds promise for advancing the assessment and management of extreme financial risks. Recent literature suggests that the application of EVT generally results in more precise estimates of extreme quantiles and tail probabilities of financial asset returns. This article assesses EVT from the perspective of financial risk management. The authors believe that the recent optimism regarding EVT may be appropriate but exaggerated, and that much of its potential remains latent. They support their claim by describing various pitfalls associated with the current use of EVT techniques, and illustrate how these can be avoided. In conclusion, the article defines several specific research directions that may further the practical and effective application of EVT to risk management.
Ivan Russo, Ilenia Confente, Jan Holmström, Mikael Öhman and Travis Tokar
The purpose of this research is to highlight the significance of advancing research methodologies in logistics, operations and supply chain management. It seeks to expand the…
Abstract
Purpose
The purpose of this research is to highlight the significance of advancing research methodologies in logistics, operations and supply chain management. It seeks to expand the scope of research questions and explore areas previously constrained by traditional methodological approaches, thereby enhancing the exploration of complex, real-world business issues.
Design/methodology/approach
This commentary introduces and discusses the special issue on “Advances in Research Methodologies for Logistics and Supply Chain Management,” exploring methodological innovations, diversity and their potential to address complex business and disciplinary challenges. The commentary assesses a broad spectrum of methodologies, ranging from traditional qualitative and quantitative approaches to overlooked methods such as qualitative comparative analysis, netnography, design science, Bayesian networks, machine learning and repertory grid technique. This diverse methodological approach enables a comprehensive examination of emerging and ongoing challenges in the supply chain. In the final summary section, we highlight additional areas of research method innovation not covered in this special issue, offering a broader perspective on future directions for methodological advancements in SCM research.
Findings
The findings suggest that integrating less explored methodologies from various disciplines encourages a richer, multi-level analysis of the supply chain management landscape. This integration facilitates a deeper understanding of emerging challenges, such as geopolitical issues, global supply chain disruptions and the integration of new technologies. Additionally, the exploration of ‘white space' in research methodologies indicates significant potential for discovering new insights that bridge practical problems with theoretical contributions.
Originality/value
The value of this methodological diversity extends beyond academic enrichment. It catalyzes the generation of innovative insights crucial for business practitioners, policymakers, consultants and academics. By adopting varied research designs and methodologies, the research note can offer a broader spectrum of analytical perspectives, crucial for uncovering nuanced insights into complex, cross-cultural and relationship-based dynamics in supply chain research.
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Iza Gigauri, Maria Palazzo, Simona Andreea Apostu and Alfonso Siano
The purpose of this study is to explore the awareness, perception and attitude of consumers from Georgia toward smart, active and intelligent packaging of food products.
Abstract
Purpose
The purpose of this study is to explore the awareness, perception and attitude of consumers from Georgia toward smart, active and intelligent packaging of food products.
Design/methodology/approach
This study is based on a quantitative research method using a survey questionnaire tool to gather data from consumers in Georgia.
Findings
The scope of the sample is restricted to only one developing country. Yet, the research results are still significant in creating knowledge about innovative food packaging from different country contexts and to understanding the acceptance of intelligent active packaging by consumers.
Research limitations/implications
Intelligent packaging facilitates companies with their sustainability efforts by reducing waste and environmental impact. It increases the desirability of products as responds to customer demands and leads to consumer satisfaction. Intelligent packaging can increase trust in bioproducts; for example, it is possible to track and check or monitor the origin of a product and prove that the product producer has really manufactured a bioproduct.
Originality/value
The study contributes to the discussion of the applicability and use of packaging with enhanced features in the food industry. In this respect, the performed pilot study fills the gap in the packaging literature by investigating consumers’ perspectives on intelligent packaging in Georgia – a non-EU, post-soviet, developing country.