Financial Risk Modelling and Portfolio Optimization with R

Preface to the Second Edition xi
 
Preface xiii
 
Abbreviations xv
 
About the Companion Website xix
 
PART I MOTIVATION 1
 
1 Introduction 3
 
Reference 5
 
2 A brief course in R 6
 
2.1 Origin and development 6
 
2.2 Getting help 7
 
2.3 Working with R 10
 
2.4 Classes, methods, and functions 12
 
2.5 The accompanying package FRAPO 22
 
References 28
 
3 Financial market data 29
 
3.1 Stylized facts of financial market returns 29
 
3.1.1 Stylized facts for univariate series 29
 
3.1.2 Stylized facts for multivariate series 32
 
3.2 Implications for risk models 35
 
References 36
 
4 Measuring risks 37
 
4.1 Introduction 37
 
4.2 Synopsis of risk measures 37
 
4.3 Portfolio risk concepts 42
 
References 44
 
5 Modern portfolio theory 46
 
5.1 Introduction 46
 
5.2 Markowitz portfolios 47
 
5.3 Empirical mean-variance portfolios 50
 
References 52
 
PART II RISK MODELLING 55
 
6 Suitable distributions for returns 57
 
6.1 Preliminaries 57
 
6.2 The generalized hyperbolic distribution 57
 
6.3 The generalized lambda distribution 60
 
6.4 Synopsis of R packages for GHD 66
 
6.4.1 The package fBasics 66
 
6.4.2 The package GeneralizedHyperbolic 67
 
6.4.3 The package ghyp 69
 
6.4.4 The package QRM 70
 
6.4.5 The package SkewHyperbolic 70
 
6.4.6 The package VarianceGamma 71
 
6.5 Synopsis of R packages for GLD 71
 
6.5.1 The package Davies 71
 
6.5.2 The package fBasics 72
 
6.5.3 The package gld 73
 
6.5.4 The package lmomco 73
 
6.6 Applications of the GHD to risk modelling 74
 
6.6.1 Fitting stock returns to the GHD 74
 
6.6.2 Risk assessment with the GHD 77
 
6.6.3 Stylized facts revisited 80
 
6.7 Applications of