This work looks at a wide range of models to test the degree to which CECL is procyclical for different types of model.
In this paper, we investigate the alpha factor’s sensitivity to key model parameters under stylized portfolio assumptions in order to better understand its complex characteristics. Our analysis is based on the numerical simulation of alpha sensitivities…
This paper provides an alternative way to introduce the stylized facts on electricity futures.
International Financial Reporting Standard 9 expected credit loss estimation: advanced models for estimating portfolio loss and weighting scenario losses
In this paper, the authors propose a model to estimate the expected portfolio losses brought about by recession risk and a quantitative approach to determine the scenario weights. The model and approach are validated by an empirical example, where they…
This paper proposes a novel method for estimating future operational risk capital: incremental value-at-risk (IVaR)
This paper determines if enough data is available for forecasting or stress testing, a better measure of data length is required.
This paper finds that a zero-investment strategy that goes long (short) in the highest (lowest) quintiles of firm-specific risk earns overall positive excess returns across twenty-one emerging markets.
This paper shows analytically that a volatility-targeted allocation methodology improves the risk-adjusted performance of portfolios under a broad set of assumptions regarding the serial correlation of returns and the dependence of the expected Sharpe…
In this paper, the authors show the connection between equities and foreign exchange markets via this window, they leverage this connection using an algorithmic trading strategy and rank various statistical techniques used to make predictions for trading…
An internal default risk model: simulation of default times and recovery rates within the new Fundamental Review of the Trading Book framework
This paper presents a new default risk model for market risk that is consistent with these requirements. The recovery rates follow a waterfall model that is based on a minimum entropy principle.
Using a simple model, this paper derives two results that provide guiding principles for hedging by, and capital regulation of, financial institutions.
This paper uses a twenty-year data set of all publicly listed US firms from 1995 to 2014 to create a unique measure of both the extent and the scope of firm-level multinationality.
This paper provides insight into how the collected data pursuant to the EMIR can be used to shed light on the complex network of interrelations underlying the financial markets.
In this paper, the authors present new evidence on the structure of euro area securities markets using a multilayer network approach.
In this paper, the authors show how to exploit the available data to build portfolios that better fit the risk profiles of investors. This is made possible, on the one hand, by constructing groups of homogeneous risk profiles based on user responses to…
This paper considers the problem of efficiently computing the full matrix of second-order sensitivities of a Monte Carlo price when the number of inputs is large.
In this paper, we refer to the axiomatic theory of risk and investigate the problem of formal verification of the expected shortfall (ES) model based on a sample ES. Recognizing the infeasibility of parametric methods, they explore the bootstrap…
This paper examines the role of supervisory stress testing of central counterparties (CCPs). A key message is that the design of supervisory stress tests (SSTs) should be tailored to CCPs’ roles, risk profiles and financial structures.
This paper develops a method to identify quantitative risks in financial market infrastructures (FMIs) that is inspired by the Principles for Financial Market Infrastructures.
In this study, the authors search for a benchmark model with available market-based predictors to evaluate the net contribution of internet search activity data in forecasting volatility. The paper conducts in-sample analysis and out-of-sample…
This paper provides a rationale for adopting quantitative buffer capital, designed to absorb variations due to measurement errors, especially those originating from the estimation risk.
The impact of end-user market integration and the smart grid on electricity retailers in the Nordic region
With the help of a mixed complementarity problem formulation that describes a simplified market setting with two competing retailers, this paper analyzes the impact of the pending market changes on electricity retailers’ price markup and profit.