Behavioral approach to market and default risks modeling

Taguedong, Sylvain Chamberlain (2009): Behavioral approach to market and default risks modeling. Published in: Chicago Booth School of Business Finance Research Papers and FEN Professional & Practitioner Papers Series (27 December 2009)

Abstract

In this paper we discuss popular market and default risks modeling. We highlight some shortcomings. Then, we present the prospect and cumulative prospect theories. We discuss again the previous models under behavioral finance framework and get different results. Based on these results, we propose a new Value at Risk measure and make suggestions on other measures.

• Item Type: MPRA Paper
• Language: English
• Keywords: Noise Trading; Value at Risk; Probability of Default; Risk Measure Coherence; Risk Measure's Estimator Coherence
• Subjects: G - Financial Economics > G1 - General Financial Markets; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling; G - Financial Economics > G0 - General

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