The author uses behavioral finance theory to create a measure that detects when stock markets become irrational.
In this paper, we analyze the use and impact of limits in TARGET2. Limits in the form of bilateral or multilateral debit limits are a liquidity management feature in TARGET2.
In this paper we examine the effectiveness of intraday hedging models for credit default swap index trading by means of more liquidly traded exchange-based futures contracts.
We discuss various implementations of L1 filtering in order to detect some properties of noisy signals.
A joint-measure model combining Q-measure and P-measure
Julien Guyon on path-dependent volatility models
A Fourier approach to the computation of conditional value-at-risk and optimized certainty equivalents
We consider the class of risk measures associated with optimized certainty equivalents.
Capital allocation principles are used in various contexts in which the risk capital or the cost of an aggregate position has to be allocated between its constituent parts.
The presence of options in a portfolio fundamentally alters the portfolio's risk and return profiles when compared with an all-equity portfolio. In this paper, we advocate modeling a risk-based criterion for optioned portfolio selection and rebalancing...
This paper proposes a formula for a market stress test of a portfolio.
The Basel Committee on Banking Supervision has introduced strict regulatory guidance on how to validate and backtest internal model methods for credit exposure. Fabrizio Anfuso, Dimitrios Karyampas and Andreas Nawroth incorporate these guidelines into...
Regulations impose idiosyncratic capital and funding costs for holding derivatives. Idiosyncratic costs mean that no single measure makes derivatives martingales for all market participants. Chris Kenyon and Andrew Green demonstrate that regulatory-compliant...
Spread option pricing: importance of forex risk factors illustrated
A universal law for optimally dealing with proportional transaction costs
Banks can use maths - rather than special chips - to boost computing speed
The theory of optimal trading under proportional transaction costs has been considered from a variety of perspectives. In this paper, Richard Martin shows that all results can be interpreted using a universal law through trading algorithm design
Adjoint algorithmic differentiation is one of the principal innovations in risk management in recent times. Luca Capriotti and Jacky Lee show how this technique can be used to compute real-time risk for credit products, even those valued with fast semi-analytical...
In this paper, the authors compare credit risk models that are used for loan portfolios, both from a theoretical perspective and via simulation studies.