Technical paper - Risk.net
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en-gbGoodness-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-defaultFri, 21 Apr 2017 13:54:35 +0000Are 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-crisisThu, 20 Apr 2017 14:46:18 +0000Liquidity risk management implementation for selected Islamic banks in PakistanThe purpose of this particular study is to determine if any liquidity risk exists in the Islamic banks of Pakistan and, if it does, what effect it has on the resilience of the industry in that country. http://www.risk.net/journal-of-risk/4973926/liquidity-risk-management-implementation-for-selected-islamic-banks-in-pakistan
http://www.risk.net/journal-of-risk/4973926/liquidity-risk-management-implementation-for-selected-islamic-banks-in-pakistanThu, 20 Apr 2017 14:42:37 +0000Time-varying beta and the global financial crisis: evidence from Chinese and Indian firmsThis paper empirically investigates the effects of the global financial crisis of 2008 on the time-varying beta of twenty firms from China and India. http://www.risk.net/journal-of-risk/4973716/time-varying-beta-and-the-global-financial-crisis-evidence-from-chinese-and-indian-firms
http://www.risk.net/journal-of-risk/4973716/time-varying-beta-and-the-global-financial-crisis-evidence-from-chinese-and-indian-firmsThu, 20 Apr 2017 14:33:48 +0000Basel III implementation outcome in Islamic banksThis paper presents an empirical analysis based on a survey of risk managers. Its goal to improve capital standards and its scientific treatment of risk ensures that Basel III is well regarded, specifically in the Islamic banking sector of Pakistan. http://www.risk.net/journal-of-risk/4973711/basel-iii-implementation-outcome-in-islamic-banks
http://www.risk.net/journal-of-risk/4973711/basel-iii-implementation-outcome-in-islamic-banksThu, 20 Apr 2017 14:27:03 +0000Mixing SABR models for negative ratesAntonov, Konikov and Spector use an exact formula for the normal free boundary SABR to construct an arbitrage-free mixed SABR model http://www.risk.net/derivatives/interest-rate-derivatives/4717846/mixing-sabr-models-for-negative-rates
http://www.risk.net/derivatives/interest-rate-derivatives/4717846/mixing-sabr-models-for-negative-ratesFri, 07 Apr 2017 13:32:28 +0000Fast and precautious: order controls for trade executionAlgo traders propose a new optimal execution algorithm with both limit and market orders http://www.risk.net/asset-management/4682041/fast-and-precautious-order-controls-for-trade-execution
http://www.risk.net/asset-management/4682041/fast-and-precautious-order-controls-for-trade-executionThu, 06 Apr 2017 11:33:35 +0000P&L attribution for energy portfolios with non-linear exposuresCarlos Blanco and Alessandro Mauro explain how non-linear P&L attribution tools can improve a company’s business intelligence capabilities, be an effective way of benchmarking mark-to-model values, and identify key sources of risk and return on energy portfolios http://www.risk.net/cutting-edge/energy/4475266/pl-attribution-for-energy-portfolios-with-non-linear-exposures
http://www.risk.net/cutting-edge/energy/4475266/pl-attribution-for-energy-portfolios-with-non-linear-exposuresMon, 03 Apr 2017 10:05:10 +0000Default risk charge: modeling framework for the “Basel” risk measureAs a result of the Basel Committee on Banking Supervision’s Fundamental Review of the Trading Book, revised standards for capital requirements for market risk in banks’ trading books have been issued. Under the new standards, default risk needs to be measured and capitalized through a dedicated default risk charge (DRC). Although quantitative impact studies are ongoing and banks are preparing for these regulatory changes, this paper is the first to present a modeling framework for the DRC measure that projects losses over a one-year capital horizon at a 99.9% confidence level. We discuss selected risk factor models, which we use to derive simulation-based loss distributions and associated default risk figures. The model’s properties, aspects of its implementation and a comparison with the standardized approach for default risk are explored through the use of example portfolios. http://www.risk.net/journal-of-risk/4562696/default-risk-charge-modeling-framework-for-the-basel-risk-measure
http://www.risk.net/journal-of-risk/4562696/default-risk-charge-modeling-framework-for-the-basel-risk-measureThu, 30 Mar 2017 11:44:10 +0000A new bootstrap test for multiple assets joint risk testingIn this paper, a novel simulation-based methodology is proposed to test the validity of a set of marginal time series models. http://www.risk.net/journal-of-risk/4562496/a-new-bootstrap-test-for-multiple-assets-joint-risk-testing
http://www.risk.net/journal-of-risk/4562496/a-new-bootstrap-test-for-multiple-assets-joint-risk-testingThu, 30 Mar 2017 11:29:19 +0000A review of the fundamentals of the Fundamental Review of the Trading Book: standard foreign exchange rules are highly asymmetric with respect to reporting currenciesThis paper develops a framework to fully characterize the invariance of the Delta capital charge for the FX book under a change in reporting currency. http://www.risk.net/journal-of-risk/4562291/a-review-of-the-fundamentals-of-the-fundamental-review-of-the-trading-book-standard-foreign-exchange-rules-are-highly-asymmetric-with-respect-to-reporting-currencies
http://www.risk.net/journal-of-risk/4562291/a-review-of-the-fundamentals-of-the-fundamental-review-of-the-trading-book-standard-foreign-exchange-rules-are-highly-asymmetric-with-respect-to-reporting-currenciesThu, 30 Mar 2017 11:12:29 +0000Quantifying the diversity of news around stock market movesIn this paper, the authors use a topic-modeling approach to quantify the changing attentions of a major news outlet, the Financial Times, to issues of interest. http://www.risk.net/journal-of-network-theory-in-finance/4318071/quantifying-the-diversity-of-news-around-stock-market-moves
http://www.risk.net/journal-of-network-theory-in-finance/4318071/quantifying-the-diversity-of-news-around-stock-market-movesWed, 22 Mar 2017 11:46:40 +0000A network model for central counterparty liquidity risk stress testing under incomplete informationThe authors put forth a realistic network model that maximizes the use of data available to a CCP in order to simulate credit default contagion. http://www.risk.net/journal-of-financial-market-infrastructures/4294266/a-network-model-for-central-counterparty-liquidity-risk-stress-testing-under-incomplete-information
http://www.risk.net/journal-of-financial-market-infrastructures/4294266/a-network-model-for-central-counterparty-liquidity-risk-stress-testing-under-incomplete-informationTue, 21 Mar 2017 11:23:46 +0000The recent crises and central counterparty risk practices in the light of procyclicality: empirical evidenceThis paper focuses on the risk practices of Central Counterparties in the light of their potentially procyclical features. http://www.risk.net/journal-of-financial-market-infrastructures/4124746/the-recent-crises-and-central-counterparty-risk-practices-in-the-light-of-procyclicality-empirical-evidence
http://www.risk.net/journal-of-financial-market-infrastructures/4124746/the-recent-crises-and-central-counterparty-risk-practices-in-the-light-of-procyclicality-empirical-evidenceWed, 15 Mar 2017 16:19:53 +0000I’ve got you under my skin: large central counterparty financial resources and the incentives they create
http://www.risk.net/journal-of-financial-market-infrastructures/4006531/ive-got-you-under-my-skin-large-central-counterparty-financial-resources-and-the-incentives-they-create
http://www.risk.net/journal-of-financial-market-infrastructures/4006531/ive-got-you-under-my-skin-large-central-counterparty-financial-resources-and-the-incentives-they-createThu, 09 Mar 2017 10:00:00 +0000Optimal trading with linear and (small) non-linear costsBouchaud et al find the optimal trading strategy for a family of predictive signals in the presence of transaction costs http://www.risk.net/asset-management/3964451/optimal-trading-with-linear-and-small-non-linear-costs
http://www.risk.net/asset-management/3964451/optimal-trading-with-linear-and-small-non-linear-costsTue, 07 Mar 2017 04:00:00 +0000Derivatives funding, netting and accountingChristoph Burgard and Mats Kjaer expand their semi-replication framework to multiple counterparties http://www.risk.net/cutting-edge/banking/3964311/derivatives-funding-netting-and-accounting
http://www.risk.net/cutting-edge/banking/3964311/derivatives-funding-netting-and-accountingMon, 06 Mar 2017 13:55:00 +0000Nonstationarity of the intraday individual and collective seasonalities of price fluctuationsThis paper deals with statistical measures based on high frequency data from stock markets, and in particular looks at how these measures changed according to time, with a focus on before and after the crisis of 2008. http://www.risk.net/journal-of-network-theory-in-finance/3950896/nonstationarity-of-the-intraday-individual-and-collective-seasonalities-of-price-fluctuations
http://www.risk.net/journal-of-network-theory-in-finance/3950896/nonstationarity-of-the-intraday-individual-and-collective-seasonalities-of-price-fluctuationsFri, 03 Mar 2017 14:00:00 +0000Investment opportunities forecasting: a genetic programming-based dynamic portfolio trading system under a directional-change frameworkThis paper presents an autonomous effective trading system devoted to the support of decision-making processes in the financial market domain. http://www.risk.net/journal-of-computational-finance/3946026/investment-opportunities-forecasting-a-genetic-programming
http://www.risk.net/journal-of-computational-finance/3946026/investment-opportunities-forecasting-a-genetic-programmingFri, 03 Mar 2017 09:30:00 +0000Efficient pricing and super-replication of corridor variance swaps and related productsThis paper proposes a method for overhedging weighted variance using only a finite number of maturities. http://www.risk.net/journal-of-computational-finance/3945866/efficient-pricing-and-super-replication-of-corridor-variance-swaps-and-related-products
http://www.risk.net/journal-of-computational-finance/3945866/efficient-pricing-and-super-replication-of-corridor-variance-swaps-and-related-productsThu, 02 Mar 2017 10:10:19 +0000Stochastic loss given default and exposure at default in a structural model of portfolio credit riskThe authors develop a factor-type latent variable model for portfolio credit risk that accounts for stochastically dependent probability of default (PD), loss given default (LGD) and exposure at default (EAD) at both the systematic and borrower specific levels. http://www.risk.net/journal-of-credit-risk/3937681/stochastic-loss-given-default-and-exposure-at-default-in-a-structural-model-of-portfolio-credit-risk
http://www.risk.net/journal-of-credit-risk/3937681/stochastic-loss-given-default-and-exposure-at-default-in-a-structural-model-of-portfolio-credit-riskMon, 27 Feb 2017 10:05:47 +0000A structural model for estimating losses associated with the mis-selling of retail banking productsIn this paper, a structural model is presented for estimating losses associated with the mis-selling of retail banking products. It is the first paper to consider factor-based modeling for this operational/conduct risk scenario. http://www.risk.net/journal-of-operational-risk/3937336/a-structural-model-for-estimating-losses-associated-with-the
http://www.risk.net/journal-of-operational-risk/3937336/a-structural-model-for-estimating-losses-associated-with-theFri, 24 Feb 2017 15:52:46 +0000How the interbank market becomes systemically dangerous: an agent-based network model of financial distress propagationIn this paper, the authors study the stability of the interbank market to exogenous shocks using an agent-based network framework. http://www.risk.net/journal-of-network-theory-in-finance/3916981/how-the-interbank-market-becomes-systemically-dangerous-an-agent-based-network-model-of-financial-distress-propagation
http://www.risk.net/journal-of-network-theory-in-finance/3916981/how-the-interbank-market-becomes-systemically-dangerous-an-agent-based-network-model-of-financial-distress-propagationThu, 23 Feb 2017 09:30:00 +0000Reputation risk contagionThe aim of this paper is to assess the effects of the reputation of the members of a group on any single member of the group using the concepts of social influence and convergence in belief. http://www.risk.net/journal-of-network-theory-in-finance/3916926/reputation-risk-contagion
http://www.risk.net/journal-of-network-theory-in-finance/3916926/reputation-risk-contagionWed, 22 Feb 2017 14:29:21 +0000Interconnectedness risk and active portfolio managementThis paper studies centrality (interconnectedness risk) measures and their added value in an active portfolio optimization framework. http://www.risk.net/journal-of-investment-strategies/3916861/interconnectedness-risk-and-active-portfolio-management
http://www.risk.net/journal-of-investment-strategies/3916861/interconnectedness-risk-and-active-portfolio-managementWed, 22 Feb 2017 11:09:37 +0000Risk constraints for portfolio optimization with fixed-fee transaction costIn this paper the authors investigate how fixed-fee transaction costs affect portfolio rebalancing. http://www.risk.net/journal-of-investment-strategies/3916836/risk-constraints-for-portfolio-optimization-with-fixed-fee-transaction-cost
http://www.risk.net/journal-of-investment-strategies/3916836/risk-constraints-for-portfolio-optimization-with-fixed-fee-transaction-costWed, 22 Feb 2017 10:55:36 +0000Rating momentum in the macroeconomic stress testing and scenario analysis of credit riskThis paper focuses on the corporate stress testing models for credit risk. http://www.risk.net/journal-of-risk-model-validation/3916491/rating-momentum-in-the-macroeconomic-stress-testing-and-scenario-analysis-of-credit-risk
http://www.risk.net/journal-of-risk-model-validation/3916491/rating-momentum-in-the-macroeconomic-stress-testing-and-scenario-analysis-of-credit-riskTue, 21 Feb 2017 13:06:58 +0000Standardized measurement approach: is comparability attainable?This paper considers the claim of improved comparability of SMA outcomes by considering the ability to compare “internal loss experience” between banks. http://www.risk.net/journal-of-operational-risk/3915706/standardized-measurement-approach-is-comparability-attainable
http://www.risk.net/journal-of-operational-risk/3915706/standardized-measurement-approach-is-comparability-attainableFri, 17 Feb 2017 11:33:14 +0000Addendum to Rubtsov and Petrov (2016): “A point-in-time–through-the-cycle approach to rating assignment and probability of default calibration”
http://www.risk.net/journal-of-risk-model-validation/3914671/addendum-to-rubtsov-and-petrov-2016-a-point-in-time-through-the-cycle-approach-to-rating-assignment-and-probability-of-default-calibration
http://www.risk.net/journal-of-risk-model-validation/3914671/addendum-to-rubtsov-and-petrov-2016-a-point-in-time-through-the-cycle-approach-to-rating-assignment-and-probability-of-default-calibrationWed, 15 Feb 2017 12:53:32 +0000Operational risk and the three lines of defence in UK financial institutions: is three really the magic number?This paper examines the three lines of defence in the context of ORM in UK financial institutions. http://www.risk.net/journal-of-operational-risk/3914151/operational-risk-and-the-three-lines-of-defence-in-uk-financial-institutions-is-three-really-the-magic-number
http://www.risk.net/journal-of-operational-risk/3914151/operational-risk-and-the-three-lines-of-defence-in-uk-financial-institutions-is-three-really-the-magic-numberTue, 14 Feb 2017 12:42:03 +0000Investing across periods with Mahalanobis distancesThe authors propose an analytical framework to measure investment opportunities and allocate risk across time based on the Mahalanobis distance. http://www.risk.net/journal-of-investment-strategies/3914131/investing-across-periods-with-mahalanobis-distances
http://www.risk.net/journal-of-investment-strategies/3914131/investing-across-periods-with-mahalanobis-distancesTue, 14 Feb 2017 11:18:06 +0000A model combination approach to developing robust models for credit risk stress testing: an application to a stressed economyThis paper uses a model combination approach to develop robust macrofinancial models for credit risk stress testing. http://www.risk.net/journal-of-risk-model-validation/3913941/a-model-combination-approach-to-developing-robust-models-for-credit-risk-stress-testing-an-application-to-a-stressed-economy
http://www.risk.net/journal-of-risk-model-validation/3913941/a-model-combination-approach-to-developing-robust-models-for-credit-risk-stress-testing-an-application-to-a-stressed-economyMon, 13 Feb 2017 15:44:06 +0000Hidden Markov regimes in operational loss data: application to the recent financial crisisThe authors propose a method to consider business cycles in the computation of capital for operational risk. http://www.risk.net/journal-of-operational-risk/3912261/hidden-markov-regimes-in-operational-loss-data-application-to-the-recent-financial-crisis
http://www.risk.net/journal-of-operational-risk/3912261/hidden-markov-regimes-in-operational-loss-data-application-to-the-recent-financial-crisisFri, 10 Feb 2017 13:30:43 +0000Statistical risk modelsIn this paper, the authors give complete algorithms and source code for constructing statistical risk models. http://www.risk.net/journal-of-investment-strategies/3912131/statistical-risk-models
http://www.risk.net/journal-of-investment-strategies/3912131/statistical-risk-modelsFri, 10 Feb 2017 12:24:34 +0000Asset correlations and procyclical impactThe authors examine the behavior of asset correlations for companies in Taiwan under the Basel Accord’s asymptotic single-risk-factor approach. http://www.risk.net/journal-of-risk-model-validation/3911741/asset-correlations-and-procyclical-impact
http://www.risk.net/journal-of-risk-model-validation/3911741/asset-correlations-and-procyclical-impactThu, 09 Feb 2017 16:08:46 +0000The application of structural electricity models for dynamic hedgingThe authors formulate a general structural model for an energy market in order to analyze the dynamic hedging of contingent claims on spot electricity prices. http://www.risk.net/journal-of-energy-markets/3903526/the-application-of-structural-electricity-models-for-dynamic-hedging
http://www.risk.net/journal-of-energy-markets/3903526/the-application-of-structural-electricity-models-for-dynamic-hedgingThu, 09 Feb 2017 12:48:31 +0000XVA at the exercise boundaryAndrew Green and Chris Kenyon show how the decision to exercise an option is influenced by XVAs http://www.risk.net/cutting-edge/banking/3847981/xva-at-the-exercise-boundary
http://www.risk.net/cutting-edge/banking/3847981/xva-at-the-exercise-boundaryFri, 03 Feb 2017 13:22:50 +0000Identification and capitalisation of non-modellable risk factorsAdolfo Montoro, Tim Becker and Lars Popken propose techniques for systematically capturing and categorising non-modellable risk factors and risk-adequate aggregation http://www.risk.net/energy-risk/technical-paper/2480845/identification-and-capitalisation-of-non-modellable-risk-factors
http://www.risk.net/energy-risk/technical-paper/2480845/identification-and-capitalisation-of-non-modellable-risk-factorsFri, 27 Jan 2017 13:02:01 +0000Calibration of temperature futures by changing the mean reversionThe authors of this paper study the calibration of futures contracts on temperature indexes. http://www.risk.net/journal-of-energy-markets/2480921/calibration-of-temperature-futures-by-changing-the-mean-reversion
http://www.risk.net/journal-of-energy-markets/2480921/calibration-of-temperature-futures-by-changing-the-mean-reversionFri, 27 Jan 2017 11:00:00 +0000A nonlinear analysis of operational risk events in Australian banksThis paper proposes a methodology applied to complex systems to analyze operational risk events in Australian banks. http://www.risk.net/journal-of-operational-risk/2480856/a-nonlinear-analysis-of-operational-risk-events-in-australian-banks
http://www.risk.net/journal-of-operational-risk/2480856/a-nonlinear-analysis-of-operational-risk-events-in-australian-banksThu, 26 Jan 2017 15:05:00 +0000Financial distress pre-warning indicators: a case study on Italian listed companiesThis paper focuses on the ability of accounting ratios to predict the financial distress status of a firm as defined by the law. http://www.risk.net/journal-of-credit-risk/2480535/financial-distress-pre-warning-indicators-a-case-study-on-italian-listed-companies
http://www.risk.net/journal-of-credit-risk/2480535/financial-distress-pre-warning-indicators-a-case-study-on-italian-listed-companiesMon, 23 Jan 2017 08:53:00 +0000Rethinking the margin period of riskThe authors describe a new framework for modeling collateralized exposure under an International Swaps and Derivatives Association Master Agreement with a Credit Support Annex. http://www.risk.net/journal-of-credit-risk/2480534/rethinking-the-margin-period-of-risk
http://www.risk.net/journal-of-credit-risk/2480534/rethinking-the-margin-period-of-riskFri, 20 Jan 2017 15:40:00 +0000Do investors price industry risk? Evidence from the cross-section of the oil industryThis paper analyzes the case of commodity-dependent industries by testing in the case of the oil industry and analyzing whether oil exposure relates to the cross-section of returns. http://www.risk.net/journal-of-energy-markets/2480155/do-investors-price-industry-risk-evidence-from-the-cross-section-of-the-oil-industry
http://www.risk.net/journal-of-energy-markets/2480155/do-investors-price-industry-risk-evidence-from-the-cross-section-of-the-oil-industryWed, 18 Jan 2017 09:00:00 +0000Point-in-time probability of default term structure models for multiperiod scenario loss projectionThe author of this paper proposes a dynamic PD term structure model for multi-period stress testing and expected credit loss estimation. http://www.risk.net/journal-of-risk-model-validation/technical-paper/2480144/point-in-time-probability-of-default-term-structure-models-for-multiperiod-scenario-loss-projection
http://www.risk.net/journal-of-risk-model-validation/technical-paper/2480144/point-in-time-probability-of-default-term-structure-models-for-multiperiod-scenario-loss-projectionMon, 16 Jan 2017 09:00:00 +0000Creditwatches and their impact on financial markets
http://www.risk.net/journal-of-credit-risk/2480236/creditwatches-and-their-impact-on-financial-markets
http://www.risk.net/journal-of-credit-risk/2480236/creditwatches-and-their-impact-on-financial-marketsFri, 13 Jan 2017 09:00:00 +0000Modeling energy spreads with a generalized novel mean-reverting stochastic processIn this paper, the authors investigate the new mean-reverting RW and its continuous-time limit, introduced by Moosavi and Davison (2016). http://www.risk.net/journal-of-energy-markets/technical-paper/2480152/modeling-energy-spreads-with-a-generalized-novel-mean-reverting-stochastic-process
http://www.risk.net/journal-of-energy-markets/technical-paper/2480152/modeling-energy-spreads-with-a-generalized-novel-mean-reverting-stochastic-processThu, 12 Jan 2017 09:00:00 +0000Debt–liquidity shock risk: intertemporal effects and probability measuresThis paper analyzes how the yield of government securities may be managed in order to save costs in the face of the risk of a liquidity shock. http://www.risk.net/journal-of-risk/2479632/debt-liquidity-shock-risk-intertemporal-effects-and-probability-measures
http://www.risk.net/journal-of-risk/2479632/debt-liquidity-shock-risk-intertemporal-effects-and-probability-measuresWed, 11 Jan 2017 09:00:00 +0000The temporal dimension of riskThis paper mathematically formalizes the concept of a temporal path-dependent risk measure in order to capture the risk associated with the temporal dimension of a stochastic process. http://www.risk.net/journal-of-risk/2479398/the-temporal-dimension-of-risk
http://www.risk.net/journal-of-risk/2479398/the-temporal-dimension-of-riskWed, 11 Jan 2017 09:00:00 +0000International diversification through iShares and their rivalsIn this paper, the authors investigate the diversification benefits of iShares and their rivals (CECFs and American depositary receipts) between April 1996 and December 2004. http://www.risk.net/journal-of-risk/2479675/international-diversification-through-ishares-and-their-rivals
http://www.risk.net/journal-of-risk/2479675/international-diversification-through-ishares-and-their-rivalsWed, 11 Jan 2017 09:00:00 +0000Analytical method of computing stressed value-at-risk with conditional value-at-riskThe author of this paper develops an analytical form of stressed value-at-risk (analytical SVaR), using conditional value-at-risk (CoVaR). http://www.risk.net/journal-of-risk/2479399/analytical-method-of-computing-stressed-value-at-risk-with-conditional
http://www.risk.net/journal-of-risk/2479399/analytical-method-of-computing-stressed-value-at-risk-with-conditionalWed, 11 Jan 2017 09:00:00 +0000