title: Financial Crisis: A New Measure for Risk of Pension Fund Portfolios.
abstract: It has been argued that pension funds should have limitations on their asset allocation, based on the risk profile of the different financial instruments available on the financial markets. This issue proves to be highly relevant at times of market crisis, when a regulation establishing limits to risk taking for pension funds could prevent defaults. In this paper we present a framework for evaluating the risk level of a single financial instrument or a portfolio. By assuming that the log asset returns can be described by a multifractional Brownian motion, we evaluate the risk using the time dependent Hurst parameter H(t) which models volatility. To provide a measure of the risk, we model the Hurst parameter with a random variable with mixture of beta distribution. We prove the efficacy of the methodology by implementing it on different risk level financial instruments and portfolios.
authors.affiliation: Department of Political Science, Communication, Engineering and Information Technologies, University of Sassari, Sassari, Italy.
authors.forename: Marinella
authors.initials: M
authors.lastname: Cadoni
authors.affiliation: Department of Economics, Universitas Mercatorum, Rome, Italy.
authors.forename: Roberta
authors.initials: R
authors.lastname: Melis
authors.affiliation: Department of Economics and Business, University of Sassari, Sassari, Italy.
authors.forename: Alessandro
authors.initials: A
authors.lastname: Trudda
mesh_terms: D005376:Financial Management / Q000191:economics*; D006801:Humans; D007449:Investments / Q000191:economics*; D018803:Models, Economic; D010415:Pensions; D012306:Risk