Technical papers - Risk.net
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Technical papersBayesian synthesis of portfolio credit risk with missing ratings
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This paper uses a maximum likelihood estimation to assess the projected average default rates of debt portfolios. <!-- end-summary --> </p>
http://www.risk.net/journal-of-risk/technical-paper/2429587/bayesian-synthesis-of-portfolio-credit-risk-with-missing-ratings
http://www.risk.net/journal-of-risk/technical-paper/2429587/bayesian-synthesis-of-portfolio-credit-risk-with-missing-ratingsThu, 08 Oct 2015 11:25:00 +0100Extreme value theory, asset ranking and threshold choice: a practical note on VaR estimation
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This paper analyzes asset rankings derived from state-of-the-art POT approaches to estimate VaR. <!-- end-summary --> </p>
http://www.risk.net/journal-of-risk/technical-paper/2428929/extreme-value-theory-asset-ranking-and-threshold-choice-a-practical-note-on-var-estimation
http://www.risk.net/journal-of-risk/technical-paper/2428929/extreme-value-theory-asset-ranking-and-threshold-choice-a-practical-note-on-var-estimationMon, 05 Oct 2015 11:30:00 +0100Cutting edge introduction: Expanding collateral options
<p><img alt="techtree2" src="http://www.risk.net/IMG/934/285934/techtree2-320x198.jpg" title="" /></p>
<p><!-- subheading --> Two RBC quants propose a way to value CSAs with more than two currency posting options <!-- end-subheading --> <!-- summary --> Pricing the optionality in derivatives trades where counterparties have the right to post multiple currencies as margin is a notoriously complex problem – so many ignore it. Research by quants at RBC Capital Markets might help put it back on the agenda <!-- end-summary --> </p>
http://www.risk.net/risk-magazine/technical-paper/2428133/cutting-edge-introduction-expanding-collateral-options
http://www.risk.net/risk-magazine/technical-paper/2428133/cutting-edge-introduction-expanding-collateral-optionsThu, 01 Oct 2015 16:47:48 +0100A non-linear PDE for XVA by forward Monte Carlo
<p><img alt="phrenology-model-head-calculation-modulation-order" src="http://www.risk.net/IMG/049/88049/phrenology-model-head-calculation-modulation-order-320x198.jpg" title="." /></p>
<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> Vladimir Piterbarg considers a non-linear partial differentiation equation that appears in a number of XVA-related contexts, including a one-way credit-support annex, credit value adjustment with risky closeout, option pricing with differential borrowing and lending rates, accounting-consistent valuation and constrained cash supply. In showing its solution is given as the minimum of solutions of certain related but linear PDEs, he develops an efficient forward simulation algorithm for any number of dimensions <!-- end-summary --> </p>
http://www.risk.net/risk-magazine/technical-paper/2428230/a-non-linear-pde-for-xva-by-forward-monte-carlo
http://www.risk.net/risk-magazine/technical-paper/2428230/a-non-linear-pde-for-xva-by-forward-monte-carloThu, 01 Oct 2015 11:52:00 +0100Collateral option valuation made easy
<p><img alt="collateral" src="http://www.risk.net/IMG/934/251934/collateral-2-320x198.jpg" title="" /></p>
<p><!-- subheading --> Vladimir Sankovich and Qinghua Zhu develop a method to value cheapest-to-deliver option embedded in CSAs <!-- end-subheading --> <!-- summary --> The option to switch the currency of posted collateral embedded in some credit support annexes may have a significant impact on the discounting of derivatives contracts. In this paper, Vladimir Sankovich and Qinghua Zhu develop an approximation for the value of the cheapest-to-deliver option, demonstrate how the necessary model parameters can be implied from historical data and show how it can be applied to baskets with any number of collateral currencies <!-- end-summary --> </p>
http://www.risk.net/risk-magazine/technical-paper/2428223/collateral-option-valuation-made-easy
http://www.risk.net/risk-magazine/technical-paper/2428223/collateral-option-valuation-made-easyWed, 30 Sep 2015 13:00:23 +0100Historical simulation with component weight and ghosted scenarios
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This paper puts forward two strategies for improving Historical Simulation in weak areas. <!-- end-summary --> </p>
http://www.risk.net/journal-of-risk/technical-paper/2427781/historical-simulation-with-component-weight-and-ghosted-scenarios
http://www.risk.net/journal-of-risk/technical-paper/2427781/historical-simulation-with-component-weight-and-ghosted-scenariosMon, 28 Sep 2015 10:25:00 +0100Real-time prediction and post-mortem analysis of the Shanghai 2015 stock market bubble and crash
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This paper assesses the performance of the real-time diagnostic of the bubble regime in Chinese stock markets. <!-- end-summary --> </p>
http://www.risk.net/journal-of-investment-strategies/technical-paper/2427649/real-time-prediction-and-post-mortem-analysis-of-the-shanghai-2015-stock-market-bubble-and-crash
http://www.risk.net/journal-of-investment-strategies/technical-paper/2427649/real-time-prediction-and-post-mortem-analysis-of-the-shanghai-2015-stock-market-bubble-and-crashFri, 25 Sep 2015 12:45:00 +0100Optimal betting sizes for the game of blackjack
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> The authors of this paper develop the theory of Kelly and Thorp for determining optimal bet sizes for blackjack by incorporating two practical considerations. <!-- end-summary --> </p>
http://www.risk.net/journal-of-investment-strategies/technical-paper/2427156/optimal-betting-sizes-for-the-game-of-blackjack
http://www.risk.net/journal-of-investment-strategies/technical-paper/2427156/optimal-betting-sizes-for-the-game-of-blackjackFri, 25 Sep 2015 12:30:00 +0100The impact of visible and dark orders
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This paper presents empirical evidence of how different components of order flow affect returns. <!-- end-summary --> </p>
http://www.risk.net/journal-of-investment-strategies/technical-paper/2426601/the-impact-of-visible-and-dark-orders
http://www.risk.net/journal-of-investment-strategies/technical-paper/2426601/the-impact-of-visible-and-dark-ordersFri, 25 Sep 2015 12:30:00 +0100A unified framework for risk-based investing
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This paper aims to help investors better understand the commonalities and differences between risk-based portfolio strategies in the investment industry. <!-- end-summary --> </p>
http://www.risk.net/journal-of-investment-strategies/technical-paper/2425997/a-unified-framework-for-risk-based-investing
http://www.risk.net/journal-of-investment-strategies/technical-paper/2425997/a-unified-framework-for-risk-based-investingFri, 25 Sep 2015 12:30:00 +0100Stress testing and model validation: application of the Bayesian approach to a credit risk portfolio
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> The authors of this paper develop a Bayesian-based credit risk stress-testing methodology. <!-- end-summary --> </p>
http://www.risk.net/journal-of-risk-model-validation/technical-paper/2426782/stress-testing-and-model-validation-application-of-the-bayesian-approach-to-a-credit-risk-portfolio
http://www.risk.net/journal-of-risk-model-validation/technical-paper/2426782/stress-testing-and-model-validation-application-of-the-bayesian-approach-to-a-credit-risk-portfolioFri, 25 Sep 2015 12:00:00 +0100Risk model validation for BRICS countries: a value-at-risk, expected shortfall and extreme value theory approach
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> The authors of this paper employ value-at-risk (VaR) and expected shortfall (ES) as risk measures to assess the competency of several volatility models, based on the stock indexes of the BRICS countries (Brazil, Russia, India, China and South Africa) after the financial crisis. <!-- end-summary --> </p>
http://www.risk.net/journal-of-risk-model-validation/technical-paper/2424800/risk-model-validation-for-brics-countries-a-value-at-risk-expected-shortfall-and-extreme-value-theory-approach
http://www.risk.net/journal-of-risk-model-validation/technical-paper/2424800/risk-model-validation-for-brics-countries-a-value-at-risk-expected-shortfall-and-extreme-value-theory-approachFri, 25 Sep 2015 12:00:00 +0100Comprehensive Capital Analysis and Review stress tests: is regression the only tool for loss projection?
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> The authors of this paper present a cross-sectional stress test analysis of major US banks. <!-- end-summary --> </p>
http://www.risk.net/journal-of-risk-model-validation/technical-paper/2427631/comprehensive-capital-analysis-and-review-stress-tests-is-regression-the-only-tool-for-loss-projection
http://www.risk.net/journal-of-risk-model-validation/technical-paper/2427631/comprehensive-capital-analysis-and-review-stress-tests-is-regression-the-only-tool-for-loss-projectionFri, 25 Sep 2015 11:55:00 +0100Loss given default modeling: an application to data from a Polish bank
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This paper compares two methods of estimating LGD: a beta regression model and a multinomial logit (MNL) model. <!-- end-summary --> </p>
http://www.risk.net/journal-of-risk-model-validation/technical-paper/2425809/loss-given-default-modeling-an-application-to-data-from-a-polish-bank
http://www.risk.net/journal-of-risk-model-validation/technical-paper/2425809/loss-given-default-modeling-an-application-to-data-from-a-polish-bankFri, 25 Sep 2015 11:55:00 +0100Guest Editorial for The Journal of Operational Risk: Volume 10, Number 3 (September 2015)
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http://www.risk.net/journal-of-operational-risk/technical-paper/2427613/guest-editorial-for-the-journal-of-operational-risk-volume-10-number-3
http://www.risk.net/journal-of-operational-risk/technical-paper/2427613/guest-editorial-for-the-journal-of-operational-risk-volume-10-number-3Fri, 25 Sep 2015 11:30:00 +0100Outsourcing risk: a separate operational risk category?
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This paper identifies three steps in sourcing risk. <!-- end-summary --> </p>
http://www.risk.net/journal-of-operational-risk/technical-paper/2424197/outsourcing-risk-a-separate-operational-risk-category
http://www.risk.net/journal-of-operational-risk/technical-paper/2424197/outsourcing-risk-a-separate-operational-risk-categoryFri, 25 Sep 2015 11:15:00 +0100Truncated lognormals as a power-law mimic in operational risk
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This paper makes use of the power-law mimicry properties of the truncated lognormal distribution and shows how they fit operational risk data considerably well. <!-- end-summary --> </p>
http://www.risk.net/journal-of-operational-risk/technical-paper/2422578/truncated-lognormals-as-a-power-law-mimic-in-operational-risk
http://www.risk.net/journal-of-operational-risk/technical-paper/2422578/truncated-lognormals-as-a-power-law-mimic-in-operational-riskFri, 25 Sep 2015 11:15:00 +0100Which risk–collateral channels affect loan management?
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This study examines the empirical relation between loan risk and the economic characteristics of collateral, each of which may be associated with the empirical dominance of different risk-collateral channels implied by economic theory. <!-- end-summary --> </p>
http://www.risk.net/journal-of-energy-markets/technical-paper/2425678/which-risk-collateral-channels-affect-loan-management
http://www.risk.net/journal-of-energy-markets/technical-paper/2425678/which-risk-collateral-channels-affect-loan-managementFri, 25 Sep 2015 11:10:00 +0100A weighted likelihood estimator for operational risk data: improving the accuracy of capital estimates by robustifying maximum likelihood estimates
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This paper proposes the use of a robust generalization of MLEs for the modeling of operational loss data. <!-- end-summary --> </p>
http://www.risk.net/journal-of-operational-risk/technical-paper/2425497/a-weighted-likelihood-estimator-for-operational-risk-data-improving-the-accuracy-of-capital-estimates-by-robustifying-maximum-likelihood-estimates
http://www.risk.net/journal-of-operational-risk/technical-paper/2425497/a-weighted-likelihood-estimator-for-operational-risk-data-improving-the-accuracy-of-capital-estimates-by-robustifying-maximum-likelihood-estimatesFri, 25 Sep 2015 11:10:00 +0100Mitigating rogue-trading behavior by means of appropriate, effective operational risk management
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This paper discusses the violation of applicable firm guidelines by individuals employed by a bank or financial institution and suggests specific metrics to identify and prevent such behaviour. <!-- end-summary --> </p>
http://www.risk.net/journal-of-operational-risk/technical-paper/2421847/mitigating-rogue-trading-behavior-by-means-of-appropriate-effective-operational-risk-management
http://www.risk.net/journal-of-operational-risk/technical-paper/2421847/mitigating-rogue-trading-behavior-by-means-of-appropriate-effective-operational-risk-managementFri, 25 Sep 2015 11:10:00 +0100The informational role of spot prices and inventories
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> The authors of this paper argue that fundamental determinants of speculative futures trading may have been misinterpreted by some as “excessive” speculation in the energy markets in recent years. <!-- end-summary --> </p>
http://www.risk.net/journal-of-energy-markets/technical-paper/2424619/the-informational-role-of-spot-prices-and-inventories
http://www.risk.net/journal-of-energy-markets/technical-paper/2424619/the-informational-role-of-spot-prices-and-inventoriesFri, 25 Sep 2015 11:05:00 +0100Risk evaluation of wind turbine investments
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This paper assesses the risk inherent in wind turbine investments that rely on a power market in order to determine the selling price of generated power. <!-- end-summary --> </p>
http://www.risk.net/journal-of-energy-markets/technical-paper/2422831/risk-evaluation-of-wind-turbine-investments
http://www.risk.net/journal-of-energy-markets/technical-paper/2422831/risk-evaluation-of-wind-turbine-investmentsFri, 25 Sep 2015 11:05:00 +0100Forecasting of carbon emissions prices by the adaptive neuro–fuzzy inference system
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http://www.risk.net/journal-of-energy-markets/technical-paper/2421370/forecasting-of-carbon-emissions-prices-by-the-adaptive-neuro-fuzzy-inference-system
http://www.risk.net/journal-of-energy-markets/technical-paper/2421370/forecasting-of-carbon-emissions-prices-by-the-adaptive-neuro-fuzzy-inference-systemFri, 25 Sep 2015 11:05:00 +0100Estimation of risk measures on electricity markets with fat-tailed distributions
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This paper proposes an AR–GARCH-type EVT model with various innovations for energy price risk quantification. <!-- end-summary --> </p>
http://www.risk.net/journal-of-energy-markets/technical-paper/2420403/estimation-of-risk-measures-on-electricity-markets-with-fat-tailed-distributions
http://www.risk.net/journal-of-energy-markets/technical-paper/2420403/estimation-of-risk-measures-on-electricity-markets-with-fat-tailed-distributionsFri, 25 Sep 2015 11:00:00 +0100Covered option strategies in Nordic electricity markets
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This paper deals with the performance of popular option strategies in the Nordic power derivatives market. <!-- end-summary --> </p>
http://www.risk.net/journal-of-energy-markets/technical-paper/2419384/covered-option-strategies-in-nordic-electricity-markets
http://www.risk.net/journal-of-energy-markets/technical-paper/2419384/covered-option-strategies-in-nordic-electricity-marketsFri, 25 Sep 2015 10:55:00 +0100Regulatory and supervisory deference in the context of Australia’s over-the-counter derivative trade reporting and derivative trade repositories regimes
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This paper provides an Australian regulatory perspective on the over-the-counter landscape and shows how regulatory
deference can play a facilitating role in the cross-border context. <!-- end-summary --> </p>
http://www.risk.net/journal-of-financial-market-infrastructures/technical-paper/2426475/regulatory-and-supervisory-deference-in-the-context-of-australia-s-over-the-counter-derivative-trade-reporting-and-derivative-trade-repositories-regimes
http://www.risk.net/journal-of-financial-market-infrastructures/technical-paper/2426475/regulatory-and-supervisory-deference-in-the-context-of-australia-s-over-the-counter-derivative-trade-reporting-and-derivative-trade-repositories-regimesTue, 22 Sep 2015 15:45:00 +0100Central counterparties: addressing their too-important-to-fail nature
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This paper argues that the current international policy measures with respect to central counterparties (CCPs) only partly address the systemic risk posed by CCPs. <!-- end-summary --> </p>
http://www.risk.net/journal-of-financial-market-infrastructures/technical-paper/2426471/central-counterparties-addressing-their-too-important-to-fail-nature
http://www.risk.net/journal-of-financial-market-infrastructures/technical-paper/2426471/central-counterparties-addressing-their-too-important-to-fail-natureMon, 21 Sep 2015 15:31:00 +0100Network-based measures as leading indicators of market instability: the case of the Spanish stock market
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This paper identifies links between time series data of stock returns for the purpose of understanding the structure of the market and for identifying early-warning signals of forthcoming market stress. <!-- end-summary --> </p>
http://www.risk.net/journal-of-network-theory-in-finance/technical-paper/2426266/network-based-measures-as-leading-indicators-of-market-instability-the-case-of-the-spanish-stock-market
http://www.risk.net/journal-of-network-theory-in-finance/technical-paper/2426266/network-based-measures-as-leading-indicators-of-market-instability-the-case-of-the-spanish-stock-marketMon, 21 Sep 2015 11:05:00 +0100Analysis of risk factors in the Korean repo market based on US and European repo market experiences during the global financial crisis
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This paper evaluates the Korean repo market in the light of the global financial crisis. <!-- end-summary --> </p>
http://www.risk.net/journal-of-financial-market-infrastructures/technical-paper/2426468/analysis-of-risk-factors-in-the-korean-repo-market-based-on-us-and-european-repo-market-experiences-during-the-global-financial-crisis
http://www.risk.net/journal-of-financial-market-infrastructures/technical-paper/2426468/analysis-of-risk-factors-in-the-korean-repo-market-based-on-us-and-european-repo-market-experiences-during-the-global-financial-crisisFri, 18 Sep 2015 15:22:00 +0100Group lending to a borrower network: a partial joint liability model
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This paper uses network theory to develop models for credit decisions in group
lending schemes. <!-- end-summary --> </p>
http://www.risk.net/journal-of-network-theory-in-finance/technical-paper/2425898/group-lending-to-a-borrower-network-a-partial-joint-liability-model
http://www.risk.net/journal-of-network-theory-in-finance/technical-paper/2425898/group-lending-to-a-borrower-network-a-partial-joint-liability-modelThu, 17 Sep 2015 16:57:00 +0100Banknote printing in a less-cash society: innovate or not?
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> Leo Van Hove investigates a less-cash society from the perspective of a central bank <!-- end-summary --> </p>
http://www.risk.net/journal-of-financial-market-infrastructures/technical-paper/2426276/banknote-printing-in-a-less-cash-society-innovate-or-not
http://www.risk.net/journal-of-financial-market-infrastructures/technical-paper/2426276/banknote-printing-in-a-less-cash-society-innovate-or-notWed, 16 Sep 2015 16:35:00 +0100Too interconnected to fail: a survey of the interbank networks literature
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This paper systematically reviews the theoretical literature on interbank networks. <!-- end-summary --> </p>
http://www.risk.net/journal-of-network-theory-in-finance/technical-paper/2425987/too-interconnected-to-fail-a-survey-of-the-interbank-networks-literature
http://www.risk.net/journal-of-network-theory-in-finance/technical-paper/2425987/too-interconnected-to-fail-a-survey-of-the-interbank-networks-literatureMon, 14 Sep 2015 11:20:00 +0100Cutting Edge introduction: Sticky SABR
<p><img alt="techtree2" src="http://www.risk.net/IMG/934/285934/techtree2-320x198.jpg" title="" /></p>
<p><!-- subheading --> Quants develop a hassle-free model that can handle negative interest rates <!-- end-subheading --> <!-- summary --> Negative interest rates are tricky to model accurately, but quants at Numerix have developed a technique to better capture their dynamics, without the hassle involved in using shifted models <!-- end-summary --> </p>
http://www.risk.net/risk-magazine/technical-paper/2424849/cutting-edge-introduction-sticky-sabr
http://www.risk.net/risk-magazine/technical-paper/2424849/cutting-edge-introduction-sticky-sabrThu, 10 Sep 2015 12:12:00 +0100Credit risk: taking fluctuating asset correlations into account
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> This paper puts forward an ensemble approach for asset correlations. <!-- end-summary --> </p>
http://www.risk.net/journal-of-credit-risk/technical-paper/2421090/credit-risk-taking-fluctuating-asset-correlations-into-account
http://www.risk.net/journal-of-credit-risk/technical-paper/2421090/credit-risk-taking-fluctuating-asset-correlations-into-accountWed, 02 Sep 2015 15:43:00 +0100Wrong-way risk done right
<p><img alt="social-media-wrong-way" src="http://www.risk.net/IMG/816/311816/social-media-wrong-way-320x198.png" title="" /></p>
<p><!-- subheading --> Jacky Lee and Luca Capriotti present an arbitrage-free valuation method for counterparty exposure of credit derivates portfolios. <!-- end-subheading --> <!-- summary --> Here, Jacky Lee and Luca Capriotti present an arbitrage-free valuation framework for the counterparty exposure of credit derivatives portfolios. The method is able to consistently capture the effects of credit spread volatility and credit correlations. By introducing fast semi-analytical approximations, they demonstrate how the proposed approach can be used to handle large portfolios of credit default swaps under financially realistic models of default intensities <!-- end-summary --> </p>
http://www.risk.net/risk-magazine/technical-paper/2423281/wrong-way-risk-done-right
http://www.risk.net/risk-magazine/technical-paper/2423281/wrong-way-risk-done-rightFri, 28 Aug 2015 10:42:00 +0100On the application of spectral filters in a Fourier option pricing technique
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> When dealing with nonsmooth functions – such as a combination of a nonsmooth density and a payoff – spectral filters can be applied to deal efficiently with the so-called Gibbs phenomenon. The simplicity and effectiveness of classical filtering techniques from signal processing are demonstrated in this paper. <!-- end-summary --> </p>
http://www.risk.net/journal-of-computational-finance/technical-paper/2419841/on-the-application-of-spectral-filters-in-a-fourier-option-pricing-technique
http://www.risk.net/journal-of-computational-finance/technical-paper/2419841/on-the-application-of-spectral-filters-in-a-fourier-option-pricing-techniqueThu, 27 Aug 2015 15:07:00 +0100Counting processes for retail default modeling
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<p><!-- subheading --> <!-- end-subheading --> <!-- summary --> The article discusses the use of counting processes for retail (mortgage) default modeling.
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http://www.risk.net/journal-of-credit-risk/technical-paper/2421085/counting-processes-for-retail-default-modeling
http://www.risk.net/journal-of-credit-risk/technical-paper/2421085/counting-processes-for-retail-default-modelingWed, 26 Aug 2015 15:33:00 +0100The free boundary SABR: natural extension to negative rates
<p><img alt="falling rates" src="http://www.risk.net/IMG/348/236348/shutterstock-102379315-320x198.jpg" title="" /></p>
<p><!-- subheading --> Antonov, Konikov and Spector adapt the popular SABR model to a negative rates environment <!-- end-subheading --> <!-- summary --> In the current low interest rate environment, extending option models to negative rates has become an important issue. Here, Alexandre Antonov, Michael Konikov and Michael Spector extend the widely used SABR model to the free boundary SABR model that can handle negative rates. They derive an exact option pricing formula for the zero correlation case, and a suitable approximation for the general case. The analytical results are successfully compared with the Monte Carlo simulations <!-- end-summary --> </p>
http://www.risk.net/risk-magazine/technical-paper/2423287/the-free-boundary-sabr-natural-extension-to-negative-rates
http://www.risk.net/risk-magazine/technical-paper/2423287/the-free-boundary-sabr-natural-extension-to-negative-ratesTue, 25 Aug 2015 15:16:00 +0100Internal transfer price optimisation for integrated energy firms
<p><img alt="Internal transfer price optimisation for integrated energy firms" src="http://www.risk.net/IMG/198/325198/shu-242674186-powerlines-web-320x198.png" title="The focus of the model is to understand the impact of ITPs as incentive-setters" /></p>
<p><!-- subheading --> A framework that demonstrates optimal internal pricing will deviate from ‘arm’s length principle' <!-- end-subheading --> <!-- summary --> By selecting appropriate levels for the internal transfer prices of commodities and risk, an energy company can influence the alignment of its overall risk-return profile with its strategic objectives. Here, Henrik Specht, Sergey Zykov, Tilman Huhne and Magnus Wobben present an analytical framework to demonstrate that, under real-world conditions, the optimal internal pricing will deviate from the ‘arm’s length principle’ as it is commonly adopted by the energy industry <!-- end-summary --> </p>
http://www.risk.net/energy-risk/technical-paper/2423308/internal-transfer-price-optimisation-for-integrated-energy-firms
http://www.risk.net/energy-risk/technical-paper/2423308/internal-transfer-price-optimisation-for-integrated-energy-firmsTue, 25 Aug 2015 14:51:00 +0100