The authors conduct a head-to-head comparison of central and bilateral clearing to evaluate the impact of market structure on market stability.
This paper extensively compares mutual-information-based networks with correlation-based networks on a stand-alone basis and in the framework of active investment strategies.
This paper considers an entrepreneur who has no assets in place but possesses an option to invest in a project incurring a lump-sum investment cost, of which a fraction must be financed by entering into an equity-for-guarantee swap.
A latent variable credit risk model comprising nonlinear dependencies in a sector framework with a stochastically dependent loss given default
This paper proposes a latent variable credit risk model for large loan portfolios. It employs the concept of nested Archimedean copulas to account for both a sector-type dependence structure and a copula-dependent stochastic loss given default (LGD).
In this paper, the authors analyze the failure probabilities of the profit-and-loss attribution (PLA) test as defined in the final market risk standard published in January 2016 by the Basel Committee on Banking Supervision.
This paper expands on the foundation of model risk analytics to address the governance, organizational and human behavior challenges associated with enterprise MRM.
In this paper, the authors show that single-asset trend strategies have built-in convexity, provided their returns are aggregated over the right time scale, ie, that of the trend filter.
In this paper, two new portfolio statistics are introduced: ENT, which measures trading speed, and ENTD, which measures trading diversity. Together with vectors representing major trading directions, these provide new insight into the intrinsic…
This paper proposes a framework to identify the structure of a financial network and its evolution over time, and presents an application to an interbank market with complete actual data.
This paper considers whether the rating agency attempts to mitigate the feedback effect through its rating actions. Using Moody’s issuer ratings over 1982–2009, the paper shows that firms with greater external financing constraints are less likely to be…
This paper studies the problem of a financial agent wishing to maximize a constant relative risk-aversion expected utility of their terminal wealth while operating in an ID market.
This paper applies vine copulas with GARCH marginals to the problem of capturing asset dependence and tail dynamics for currency and commodity exposures commonly found in portfolios of global corporates.
This paper describes a model for the valuation of assets on a bank balance sheet with liquidity risk. It applies the model to single cashflows, loans, bonds and derivatives. In addition, the calibration to London Interbank Offered Rate basis spreads is…
In this paper, performance attribution is extended to an enterprise level based on the keel model. The keel model introduced here is applied to the problem of attributing enterprise value changes to various risk factors.
This paper employs the quantile regression model to examine Taiwanese companies and considers factors that researchers have identified which may influence orientation divergences for robustness testing.
This paper presents a new value-at-risk (VaR) model for the estimation of market risk in banks and other financial institutions.
Pricing multidimensional financial derivatives with stochastic volatilities using the dimensional-adaptive combination technique
In this paper, the authors present a new and general approach to price derivatives based on the Black–Scholes partial differential equation (BS-PDE) in a multidimensional setting.
In this paper, the authors give a decomposition formula to calculate the vega index (sensitivity with respect to changes in volatility) for options with prices that depend on the extrema (maximum or minimum) and terminal value of the underlying stock…
This paper proposes a numerical optimization approach that can be used to solve portfolio selection problems including several assets and involving objective functions from cumulative prospect theory (CPT).
In this paper, the authors study a hybrid tree/finite-difference method, which allows us to obtain efficient and accurate European and American option prices in the Heston–Hull– White and Heston–Hull–White2d models.
Standardized measurement approach extension to integrate insurance deduction into operational risk capital requirement
The SMA proposed in BCBS (2016) presents several issues: in particular, its two components are not sufficient to discriminate banking institutions by risk profile, thus penalizing the more virtuous ones. This paper describes a possible solution to extend…
In this paper, the authors address the issue of an efficient people-risk capital allocation for financial institutions.
This paper determines life-cycle trading strategies for portfolios subject to the US tax system.
This paper focuses upon the oil and gas industry, examining the association between exploration activity risk and company shareholder returns.