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.
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…
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.
Portfolio concentration and equity market contagion: evidence on the “flight to familiarity” across indexing methods
This paper sheds light on the entanglement of index weighting schemes.
In this paper, Paul Embrechts reviews discussions on regulation within banking (Basel III and IV) and insurance (Solvency II and Swiss Solvency Test (SST)) from a historical, personal and academic point of view.
The author presents a systematic review of the chronological evolution of risk management, in tandem with financial innovation and methodological advances in derivatives pricing.
The authors consider risk-neutral valuation of a contingent claim under bilateral counterparty risk using the well-known reduced-form approach.
In this paper, the author builds dynamic networks based on correlation and transfer entropy, using both the log returns and the volatilities of 97 stock market indexes from various parts of the world between 2000 and 2016
In this paper the authors study insolvency cascades in an interbank system, in which banks are permitted to insure their loans with credit default swaps sold by other banks.
Lifecycle investing with the profitable dividend yield strategy: simulations and nonparametric analysis
Using simulations, the author shows that life-cycle investing implemented on highly profitable and high dividend yield stocks (the profitable dividend yield strategy) provides a compelling solution to the suboptimality problem by leveraging on the…
This paper considers the problem of enhancing an investment activity by regularly adding an option trade to the portfolio mix and presented results for the single underlier of the S&P 500 index, with the underlying activity being either long the index or…
The authors present a methodological framework for quantifying interdependencies in the global market and for evaluating risk levels in the worldwide financial network.
The purpose of this paper is to review the literature on asset price bubbles to study the impact that the existence of bubbles has on standard risk management methodologies.
In this paper, the author presents an easy-to-implement, fast and accurate method for approximating extreme quantiles of compound loss distributions (frequency + severity), which are commonly used in insurance and operational risk capital models.