Technical paper - Risk.net
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en-gbLocal volatility models in commodity markets and online calibrationThis paper introduces a local volatility model for the valuation of options on commodity futures by using European vanilla option prices.
http://www.risk.net/journal-of-computational-finance/5315561/local-volatility-models-in-commodity-markets-and-online-calibration
http://www.risk.net/journal-of-computational-finance/5315561/local-volatility-models-in-commodity-markets-and-online-calibration
Fri, 18 Aug 2017 12:12:16 +0100 Using derivatives to forecast oil scenariosGenerating probability-weighted oil price scenarios from traded derivatives prices can help risk managers in the industry
http://www.risk.net/commodities/5318456/using-derivatives-to-forecast-oil-scenarios
http://www.risk.net/commodities/5318456/using-derivatives-to-forecast-oil-scenariosThu, 17 Aug 2017 11:39:32 +0100Asset price bubbles and the quantification of credit risk capital with sensitivity analysis, empirical implementation and an application to stress testingThis paper presents an analysis of the impact of asset price bubbles on standard credit risk measures.
http://www.risk.net/journal-of-risk-model-validation/5312446/asset-price-bubbles-and-the-quantification-of-credit-risk-capital-with-sensitivity-analysis-empirical-implementation-and-an-application-to-stress-testing
http://www.risk.net/journal-of-risk-model-validation/5312446/asset-price-bubbles-and-the-quantification-of-credit-risk-capital-with-sensitivity-analysis-empirical-implementation-and-an-application-to-stress-testing
Thu, 17 Aug 2017 11:03:58 +0100 Estimating the tail shape parameter from option pricesIn this paper, the author proposes a method to estimate the tail shape parameter of the risk-neutral density.
http://www.risk.net/journal-of-risk/5311761/estimating-the-tail-shape-parameter-from-option-prices
http://www.risk.net/journal-of-risk/5311761/estimating-the-tail-shape-parameter-from-option-prices
Wed, 02 Aug 2017 13:36:18 +0100 Inefficiency and bias of modified value-at-risk and expected shortfallThis paper compares mVaR and mES estimators with VaR and ES under normal and fat tailed t-distributions.
http://www.risk.net/journal-of-risk/5311726/inefficiency-and-bias-of-modified-value-at-risk-and-expected-shortfall
http://www.risk.net/journal-of-risk/5311726/inefficiency-and-bias-of-modified-value-at-risk-and-expected-shortfall
Wed, 02 Aug 2017 13:33:34 +0100 Comparing multivariate volatility forecasts by direct and indirect approachesThis paper investigates direct and indirect volatility evaluations in the multivariate framework by means of a Monte Carlo simulation.
http://www.risk.net/journal-of-risk/5311711/comparing-multivariate-volatility-forecasts-by-direct-and-indirect-approaches
http://www.risk.net/journal-of-risk/5311711/comparing-multivariate-volatility-forecasts-by-direct-and-indirect-approaches
Wed, 02 Aug 2017 13:31:43 +0100 Risk management for private equity fundsThis paper aims to fill a gap in the literature by developing the first comprehensive risk management framework for private equity fund investments.
http://www.risk.net/journal-of-risk/5311701/risk-management-for-private-equity-funds
http://www.risk.net/journal-of-risk/5311701/risk-management-for-private-equity-funds
Wed, 02 Aug 2017 13:28:59 +0100 Extremely (un)likely: a plausibility approach to stress testingCCP’s risk managers propose a framework for generating extreme but plausible stress scenarios http://www.risk.net/risk-management/5310711/extremely-unlikely-a-plausibility-approach-to-stress-testing
http://www.risk.net/risk-management/5310711/extremely-unlikely-a-plausibility-approach-to-stress-testingTue, 01 Aug 2017 08:00:00 +0100Local-stochastic volatility: models and non-modelsLorenzo Bergomi exposes a condition important to the use of LSV models in trading http://www.risk.net/derivatives/5310691/local-stochastic-volatility-models-and-non-models
http://www.risk.net/derivatives/5310691/local-stochastic-volatility-models-and-non-modelsMon, 31 Jul 2017 14:54:47 +0100A balanced approach to central counterparty marginingThis paper is meant to serve as a comparison of the approaches and margin models employed by CCPs.
http://www.risk.net/journal-of-financial-market-infrastructures/5300616/a-balanced-approach-to-central-counterparty-margining
http://www.risk.net/journal-of-financial-market-infrastructures/5300616/a-balanced-approach-to-central-counterparty-margining
Fri, 07 Jul 2017 12:10:03 +0100 Managing market liquidity risk in central counterpartiesThis paper discusses the different approaches to incorporating market liquidity risk within a CCP’s default waterfall and the challenges that these approaches pose.
http://www.risk.net/journal-of-financial-market-infrastructures/5300626/managing-market-liquidity-risk-in-central-counterparties
http://www.risk.net/journal-of-financial-market-infrastructures/5300626/managing-market-liquidity-risk-in-central-counterparties
Fri, 07 Jul 2017 12:03:28 +0100 Initial margin model sensitivity analysis and volatility estimationThis paper presents a new approach to parameter selection based on the statistical properties of the worst loss over a margin period of risk estimated by the margin model under scrutiny.
http://www.risk.net/journal-of-financial-market-infrastructures/5300636/initial-margin-model-sensitivity-analysis-and-volatility-estimation
http://www.risk.net/journal-of-financial-market-infrastructures/5300636/initial-margin-model-sensitivity-analysis-and-volatility-estimation
Fri, 07 Jul 2017 12:00:36 +0100 Performance testing of margin models using time series similarityThis paper proposes a performance test based on empirical similarity that would account for margin shortfall, procyclicality and efficiency in a single score.
http://www.risk.net/journal-of-financial-market-infrastructures/5300646/performance-testing-of-margin-models-using-time-series-similarity
http://www.risk.net/journal-of-financial-market-infrastructures/5300646/performance-testing-of-margin-models-using-time-series-similarity
Fri, 07 Jul 2017 11:56:46 +0100 Initial margin estimations for credit default swap portfoliosThis paper presents a clearinghouse framework to establish initial margin requirements for portfolios of credit default swap instruments.
http://www.risk.net/journal-of-financial-market-infrastructures/5300651/initial-margin-estimations-for-credit-default-swap-portfolios
http://www.risk.net/journal-of-financial-market-infrastructures/5300651/initial-margin-estimations-for-credit-default-swap-portfolios
Fri, 07 Jul 2017 11:54:24 +0100 Cleared margin setting at selected central counterpartiesIn this paper, the authors address one aspect of CCP risk management: initial margining practices. The paper provides a historical review of margining at selected CCPs as well as an overview of their current margin policies.
http://www.risk.net/journal-of-financial-market-infrastructures/5300656/cleared-margin-setting-at-selected-central-counterparties
http://www.risk.net/journal-of-financial-market-infrastructures/5300656/cleared-margin-setting-at-selected-central-counterparties
Fri, 07 Jul 2017 11:49:41 +0100 Accounting for initial margin under IFRS 13Chris Kenyon and Richard Kenyon show why initial margin should be part of the fair value of a derivative http://www.risk.net/derivatives/5299081/accounting-for-initial-margin-under-ifrs-13
http://www.risk.net/derivatives/5299081/accounting-for-initial-margin-under-ifrs-13Tue, 04 Jul 2017 17:46:02 +0100Trading lightly: cross-impact and optimal portfolio executionA liquidity model for basket of correlated securities is presented http://www.risk.net/risk-management/5299146/trading-lightly-cross-impact-and-optimal-portfolio-execution
http://www.risk.net/risk-management/5299146/trading-lightly-cross-impact-and-optimal-portfolio-executionTue, 04 Jul 2017 17:39:04 +0100Networks and lending conditions: empirical evidence from the Swiss franc money marketsIn this paper, the author provides an empirical analysis of the network characteristics of two interrelated interbank money markets and their effect on overall market conditions.
http://www.risk.net/journal-of-network-theory-in-finance/5299021/networks-and-lending-conditions-empirical-evidence-from-the-swiss-franc-money-markets
http://www.risk.net/journal-of-network-theory-in-finance/5299021/networks-and-lending-conditions-empirical-evidence-from-the-swiss-franc-money-markets
Tue, 04 Jul 2017 11:29:51 +0100 Causality networks of financial assetsThrough financial network analysis, this paper ascertains the existence of important causal behavior between certain financial assets, as inferred from eight different causality methods.
http://www.risk.net/journal-of-network-theory-in-finance/5298986/causality-networks-of-financial-assets
http://www.risk.net/journal-of-network-theory-in-finance/5298986/causality-networks-of-financial-assets
Tue, 04 Jul 2017 11:14:57 +0100 Visibility graph combined with information theory: an estimator of stock market efficiencyIn this paper, the authors use information theory quantifiers to analyze the graphs generated by the VG method as applied to the return rate time series of stock markets from different countries.
http://www.risk.net/journal-of-network-theory-in-finance/5298981/visibility-graph-combined-with-information-theory-an-estimator-of-stock-market-efficiency
http://www.risk.net/journal-of-network-theory-in-finance/5298981/visibility-graph-combined-with-information-theory-an-estimator-of-stock-market-efficiency
Tue, 04 Jul 2017 10:49:43 +0100 Adapting the Basel II advanced internal-ratings-based models for International Financial Reporting Standard 9This paper examines how we may use A-IRB models in the estimation of expected credit losses for IFRS 9 purposes.
http://www.risk.net/journal-of-credit-risk/5294986/adapting-the-basel-ii-advanced-internal-ratings-based-models-for-international-financial-reporting-standard-9
http://www.risk.net/journal-of-credit-risk/5294986/adapting-the-basel-ii-advanced-internal-ratings-based-models-for-international-financial-reporting-standard-9
Thu, 22 Jun 2017 15:35:15 +0100 Primary-firm-driven portfolio lossThis paper describes a simple model that can be used for risk management.
http://www.risk.net/journal-of-credit-risk/5294956/primary-firm-driven-portfolio-loss
http://www.risk.net/journal-of-credit-risk/5294956/primary-firm-driven-portfolio-loss
Thu, 22 Jun 2017 15:10:22 +0100 Portfolio credit risk model with extremal dependence of defaults and random recoveryThis paper proposes a portfolio credit risk model with random recovery rates.
http://www.risk.net/journal-of-credit-risk/5294931/portfolio-credit-risk-model-with-extremal-dependence-of-defaults-and-random-recovery
http://www.risk.net/journal-of-credit-risk/5294931/portfolio-credit-risk-model-with-extremal-dependence-of-defaults-and-random-recovery
Thu, 22 Jun 2017 14:55:22 +0100 Correctness of backtest enginesIn this paper, the authors provide tools to test the correctness of backtest engines for setups with at most one entry and one exit.
http://www.risk.net/journal-of-investment-strategies/5293511/correctness-of-backtest-engines
http://www.risk.net/journal-of-investment-strategies/5293511/correctness-of-backtest-engines
Tue, 20 Jun 2017 13:27:17 +0100 Black–Litterman, exotic beta and varying efficient portfolios: an integrated approachThis paper brings Black–Litterman optimization, exotic betas and varying starting portfolios together into one complete, symbiotic framework.
http://www.risk.net/journal-of-investment-strategies/5293501/black-litterman-exotic-beta-and-varying-efficient-portfolios-an-integrated-approach
http://www.risk.net/journal-of-investment-strategies/5293501/black-litterman-exotic-beta-and-varying-efficient-portfolios-an-integrated-approach
Tue, 20 Jun 2017 13:09:56 +0100 Agnostic risk parity: taming known and unknown unknownsThis paper offers a new perspective on portfolio allocation, which avoids any explicit optimization and instead takes the point of view of symmetry.
http://www.risk.net/journal-of-investment-strategies/5293476/agnostic-risk-parity-taming-known-and-unknown-unknowns
http://www.risk.net/journal-of-investment-strategies/5293476/agnostic-risk-parity-taming-known-and-unknown-unknowns
Tue, 20 Jun 2017 12:37:13 +0100 Optimal management of green certificates in the Swedish–Norwegian marketThis paper proposes and investigates a valuation model for the income of selling tradeable green certificates in the Swedish–Norwegian market, formulated as a singular stochastic control problem.
http://www.risk.net/journal-of-energy-markets/5287331/optimal-management-of-green-certificates-in-the-swedish-norwegian-market
http://www.risk.net/journal-of-energy-markets/5287331/optimal-management-of-green-certificates-in-the-swedish-norwegian-market
Wed, 14 Jun 2017 10:19:02 +0100 Bounding BermudansThomas Roos derives model-independent bounds for amortising and accreting Bermudan swaptions http://www.risk.net/derivatives/5288146/bounding-bermudans
http://www.risk.net/derivatives/5288146/bounding-bermudansWed, 14 Jun 2017 09:37:25 +0100A note on the statistical robustness of risk measuresThis paper focuses on the parametric estimators of risk measures and uses Hampel’s infinitesimal approach to derive the robustness properties.
http://www.risk.net/journal-of-operational-risk/5277456/a-note-on-the-statistical-robustness-of-risk-measures
http://www.risk.net/journal-of-operational-risk/5277456/a-note-on-the-statistical-robustness-of-risk-measures
Tue, 13 Jun 2017 12:46:54 +0100 Model calibration with neural networksAndres Hernandez presents a neural network approach to speed up model calibration http://www.risk.net/derivatives/5288126/model-calibration-with-neural-networks
http://www.risk.net/derivatives/5288126/model-calibration-with-neural-networksFri, 09 Jun 2017 16:34:36 +0100Modeling superior predictors for crude oil pricesThis paper provides an analysis of a broad spectrum of fundamental and nonfundamental indicators for crude oil prices.
http://www.risk.net/journal-of-energy-markets/5285396/modeling-superior-predictors-for-crude-oil-prices
http://www.risk.net/journal-of-energy-markets/5285396/modeling-superior-predictors-for-crude-oil-prices
Fri, 09 Jun 2017 10:19:57 +0100 On a family of weighted Cramér–von Mises goodness-of-fit tests in operational risk modelingThis paper applies classical theory to determine if limiting distributions exist for WCvM test statistics under a simple null hypothesis.
http://www.risk.net/journal-of-operational-risk/5277466/on-a-family-of-weighted-cramer-von-mises-goodness-of-fit-tests-in-operational-risk-modeling
http://www.risk.net/journal-of-operational-risk/5277466/on-a-family-of-weighted-cramer-von-mises-goodness-of-fit-tests-in-operational-risk-modeling
Thu, 08 Jun 2017 11:29:53 +0100 Stress hedging in portfolio constructionBilgili, Ferconi and Ulitsky propose a constrained portfolio optimisation approach incorporating stress scenarios http://www.risk.net/risk-management/5287961/stress-hedging-in-portfolio-construction
http://www.risk.net/risk-management/5287961/stress-hedging-in-portfolio-constructionWed, 07 Jun 2017 16:09:56 +0100Barriers for district heating as a source of flexibility for the electricity systemIn this paper, the authors investigate the barriers to including DH as a flexible resource for the electricity market in Denmark, Norway and Sweden.
http://www.risk.net/journal-of-energy-markets/5283956/barriers-for-district-heating-as-a-source-of-flexibility-for-the-electricity-system
http://www.risk.net/journal-of-energy-markets/5283956/barriers-for-district-heating-as-a-source-of-flexibility-for-the-electricity-system
Tue, 06 Jun 2017 10:39:59 +0100 Various approximations of the total aggregate loss quantile function with application to operational riskThis paper investigates the mechanics of the empirical aggregate loss bootstrap distribution.
http://www.risk.net/journal-of-operational-risk/5277326/various-approximations-of-the-total-aggregate-loss-quantile-function-with-application-to-operational-risk
http://www.risk.net/journal-of-operational-risk/5277326/various-approximations-of-the-total-aggregate-loss-quantile-function-with-application-to-operational-risk
Mon, 05 Jun 2017 09:56:50 +0100 Simple models in finance: a mathematical analysis of the probabilistic recognition heuristicIn this paper, the authors present a general model of the recognition heuristic that assumes that objects’ recognition is random.
http://www.risk.net/journal-of-risk-model-validation/5277036/simple-models-in-finance-a-mathematical-analysis-of-the-probabilistic-recognition-heuristic
http://www.risk.net/journal-of-risk-model-validation/5277036/simple-models-in-finance-a-mathematical-analysis-of-the-probabilistic-recognition-heuristic
Fri, 02 Jun 2017 14:39:46 +0100 A gradient-boosting decision-tree approach for firm failure prediction: an empirical model evaluation of Chinese listed companiesIn this paper, the authors employ a gradient-boosting decision-tree method to improve firm failure prediction and explain how to better analyze the relative importance of each financial variable.
http://www.risk.net/journal-of-risk-model-validation/5277031/a-gradient-boosting-decision-tree-approach-for-firm-failure-prediction-an-empirical-model-evaluation-of-chinese-listed-companies
http://www.risk.net/journal-of-risk-model-validation/5277031/a-gradient-boosting-decision-tree-approach-for-firm-failure-prediction-an-empirical-model-evaluation-of-chinese-listed-companies
Fri, 02 Jun 2017 14:26:42 +0100 Optimal execution of accelerated share repurchase contracts with fixed notionalThis paper studies the pricing and optimal execution strategy of an accelerated share repurchase contract with a fixed notional.
http://www.risk.net/journal-of-risk/5275591/optimal-execution-of-accelerated-share-repurchase-contracts-with-fixed-notional
http://www.risk.net/journal-of-risk/5275591/optimal-execution-of-accelerated-share-repurchase-contracts-with-fixed-notional
Wed, 31 May 2017 11:41:54 +0100 On empirical likelihood option pricingThis paper investigates the application of the empirical likelihood method in the study of option pricing.
http://www.risk.net/journal-of-risk/5275541/on-empirical-likelihood-option-pricing
http://www.risk.net/journal-of-risk/5275541/on-empirical-likelihood-option-pricing
Wed, 31 May 2017 11:11:33 +0100 Optimal oil production under mean-reverting Lévy models with regime switchingThis paper models the evolution of the oil price as a mean-reverting regime-switching jump–diffusion process.
http://www.risk.net/journal-of-energy-markets/5273576/optimal-oil-production-under-mean-reverting-levy-models-with-regime-switching
http://www.risk.net/journal-of-energy-markets/5273576/optimal-oil-production-under-mean-reverting-levy-models-with-regime-switching
Thu, 25 May 2017 10:55:59 +0100 Modeling impacts of stock jumps on real estate investment trust returns with application to value-at-riskThis paper aims to model the impact of extreme stock jumps on REIT returns.
http://www.risk.net/journal-of-risk-model-validation/5268606/modeling-impacts-of-stock-jumps-on-real-estate-investment-trust-returns-with-application-to-value-at-risk
http://www.risk.net/journal-of-risk-model-validation/5268606/modeling-impacts-of-stock-jumps-on-real-estate-investment-trust-returns-with-application-to-value-at-risk
Mon, 22 May 2017 09:57:51 +0100 Pricing and hedging options with rollover parametersThis paper consists of a “horse race” study comparing (i) a number of option pricing models, and (ii) roll-over estimation procedures.
http://www.risk.net/journal-of-risk/5267561/pricing-and-hedging-options-with-rollover-parameters
http://www.risk.net/journal-of-risk/5267561/pricing-and-hedging-options-with-rollover-parameters
Thu, 18 May 2017 10:45:32 +0100 Forecasting scenarios from the perspective of a reverse stress test using second-order cone programmingThis paper proposes a model for forecasting scenarios from the perspective of a reverse stress test using interest rate, equity and foreign exchange data.
http://www.risk.net/journal-of-risk-model-validation/5267071/forecasting-scenarios-from-the-perspective-of-a-reverse-stress-test-using-second-order-cone-programming
http://www.risk.net/journal-of-risk-model-validation/5267071/forecasting-scenarios-from-the-perspective-of-a-reverse-stress-test-using-second-order-cone-programming
Wed, 17 May 2017 13:08:45 +0100 Does higher-frequency data always help to predict longer-horizon volatility?This paper shows that realized conditional autocorrelation in return residuals is a strong predictor of the relative performance of different frequency models of volatility.
http://www.risk.net/journal-of-risk/5264146/does-higher-frequency-data-always-help-to-predict-longer-horizon-volatility
http://www.risk.net/journal-of-risk/5264146/does-higher-frequency-data-always-help-to-predict-longer-horizon-volatility
Thu, 11 May 2017 12:08:55 +0100 Model-free valuation of barrier optionsAusting and Li provide a continuous barrier options pricing formula that fits the volatility smile http://www.risk.net/derivatives/5226411/model-free-valuation-of-barrier-options
http://www.risk.net/derivatives/5226411/model-free-valuation-of-barrier-optionsWed, 03 May 2017 14:35:26 +0100A sound modelling and backtesting framework for forecasting initial margin requirementsAnfuso, Aziz, Loukopoulos and Giltinan propose a method to develop and backtest forecasting models for IM http://www.risk.net/risk-management/5226196/a-sound-modelling-and-backtesting-framework-for-forecasting-initial-margin-requirements
http://www.risk.net/risk-management/5226196/a-sound-modelling-and-backtesting-framework-for-forecasting-initial-margin-requirementsWed, 03 May 2017 14:33:45 +0100Does initial margin eliminate counterparty risk?Andersen, Pykhtin and Sokol show the existence of residual exposure after initial margin posting http://www.risk.net/risk-management/5209111/does-initial-margin-eliminate-counterparty-risk
http://www.risk.net/risk-management/5209111/does-initial-margin-eliminate-counterparty-riskTue, 02 May 2017 17:11:36 +0100Managing energy market volumetric riskKrzysztof Wolyniec presents a volumetric risk management model for energy markets http://www.risk.net/commodities/5092271/managing-energy-market-volumetric-risk
http://www.risk.net/commodities/5092271/managing-energy-market-volumetric-riskFri, 28 Apr 2017 14:46:22 +0100Goodness-of-fit for discrete-choice models of borrower defaultThis paper demonstrates that the rank-order tests are unreliable for assessing models to be used to predict probabilities.
http://www.risk.net/journal-of-risk-model-validation/4992916/goodness-of-fit-for-discrete-choice-models-of-borrower-default
http://www.risk.net/journal-of-risk-model-validation/4992916/goodness-of-fit-for-discrete-choice-models-of-borrower-default
Fri, 21 Apr 2017 14:54:35 +0100 Are the GIPS sovereign debt markets efficient during a crisis?This paper aims to analyze the efficiency of the Greek, Italian, Portuguese and Spanish (ie, GIPS) sovereign debt markets during crises: in essence, the recent global financial and sovereign debt crises
http://www.risk.net/journal-of-risk/4973941/are-the-gips-sovereign-debt-markets-efficient-during-a-crisis
http://www.risk.net/journal-of-risk/4973941/are-the-gips-sovereign-debt-markets-efficient-during-a-crisis
Thu, 20 Apr 2017 15:46:18 +0100