Technical paper
Volatility shape-shifters: arbitrage-free shaping of implied volatility surfaces
Manipulating implied volatility surfaces using optimal transport theory has several applications
Infrequent MtM reduces neither value-at-risk nor backtesting exceptions
Volatility spillover effects and risk assessment of Indian green stocks: a DCC-GARCH analysis
Renewable energy generation capacity following the Russian invasion of Ukraine, and the stock market performance of energy firms: evidence from southern European Union countries
Composite Tukey-type distributions with application to operational risk management
This paper investigates composite Tukey-type distributions and puts forward a new composite model, the improved flexibility of which is demonstrated.
Semi-nonparametric estimation of operational risk capital with extreme loss events
The authors put forward a means to estimate value-at-risk capital during extreme loss events which combines SNP estimation with EVT-POT theory.
New proxy schemes for swing contracts
The authors investigate the valuation of swing contracts for energy markets and propose two methods which offer more accurate calculated prices than commonly used methods.
The important role of information technology and internal auditing in risk management: evidence from Greece
The authors investigate the value of using information technologies in internal audit, finding that its effective use can help mitigate risks in business operations.
Estimating the probability of insurance recovery in operational risk
The authors put forward a novel methodology for the estimation of probability of insurance recovery.
Dynamic margining long/short equity trading strategies
A repo haircut model extends a previous solution for long-only strategies
Banking competition and systemic risk: evidence from China
The authors investigate the relationship of competition between Chinese banks and the stability of the banking system, finding that increasing competition leads to decreasing systemic risk.
SABR convexity adjustment for an arithmetic average RFR swap
A model-independent convexity adjustment for interest rate swaps is introduced
Better anti-procyclicality? From a critical assessment of anti-procyclicality tools to regulatory recommendations
The authors carry out quantitative and qualitative analysis of anti-procyclicality tools and suggest policy measures intended to make APC tools more effective.
Joint S&P 500/VIX smile calibration in discrete and continuous time
An arbitrage-free model for exotic options that captures smiles and futures is presented
Multi-factor default correlation model estimation: enhancement with bootstrapping
The authors propose using a three-factor Merton model to allow more accurate quantification when investigating the credit risk of portfolios.
Are cryptocurrencies cryptic or a source of arbitrage? A genetic algorithm approach
The authors identify triangular arbitrage trading opportunities through genetic algorithms in order to find insights into the volatility of cryptocurrencies and stablecoins with the largest market cap.
The carbon equivalence principle: minimising the cost to carbon net zero
A method to align incentives with sustainability in financial markets is introduced
Gas market area mergers: when is bigger better?
The authors investigate welfare effects of gas market area mergers and argue that merged market areas benefit from increased market power.
The impact of the Fundamental Review of the Trading Book: evaluation on a stylized portfolio
The authors investigate banks' market risk capital requirements under the internal models approach through the lens of the Basel Fundamental Review of the Trading Book, using data from the period 2007-19.
On the recovery tools of a central counterparty
The author argues that assessments should be preferred over variation margin gains haircutting when CCP resilience is tested by cases of default loss being greater than prefunded financial resources.
The trade-off between shorter settlement times and multilateral netting benefits in deferred net settlement
This paper investigates settlement windows in multilateral netting in the US equity markets, finding that there is no material loss of multilateral netting benefits for windows over an hour.
On the contagion effect between crude oil and agricultural commodity markets: a dynamic conditional correlation and spectral analysis
The authors present an empirical study concerning the volatility comovements between crude oil and agricultural commodities relative to global economic shocks such as Covid-19 and the Russo-Ukrainian war.
The cost of mis-specifying price impact
Expected returns can be significantly affected by the wrong use of impact models
Evaluating credit valuation adjustment with wrong-way risk for Bermudan options
The authors propose a method for credit valuation adjustment evaluation that avoids the need for simulation while maintaining efficiency and accuracy.