This paper analyzes the relationship between option risk and expected return from the perspective of the underlying beta, and estimates the degree of correlation.
The impact of energy costs on industrial performance: identifying price and quantity effects in the aluminum industry using a data envelopment analysis approach
The authors build a frontier function model with technical and cost efficiency measures to assess the impact of energy costs on competitiveness in the aluminum industry, a heavy energy consumer, by identifying what may be attributed to price and quantity…
Copulas can still deliver if chosen with due attention to intuition and data, says quant fund chair
Technologist talks artificial intelligence, angel investing and accidentally contributing to the Basel framework
The author presents four methods to estimate the sample variance of the accuracy ratio and the area under the curve.
The quality of a tail model, which is determined by data from an unknown distribution, depends critically on the subset of data used to model the tail. Based on a suitably weighted mean square error, the authors present a completely automated method that…
In this paper, a new method for computing the standard errors (SEs) of returns-based risk and performance estimators for serially dependent returns is developed.
Dynamically adjusting margin add-ons could reduce cyclical funding demands
This paper aims to fill a gap in the literature by providing statistical properties of the population stability index (PSI) and some recommendations on its use.
Dealers concerned new regime will punish some business lines with rise in risk-weighted assets
Quants wrestle with how far into the past their machine learning models should peer
Risk USA: EU anti-procyclicality rules like “putting a curtain over a draughty window”
Risk USA: lenders forced to apply management overlays to models skewed by macro inputs
The results of this paper show that robust forward-looking statistical models are superior to backward-looking assessments of supervisory compliance, which could lead to less regulatory burden when integrated into the examination process, particularly at…
Risk USA: system alerted US superregional to impending defaults during Covid crisis
What happens when risks become too global in scope and increasingly uncertain for a business to manage? Jeroen van Doorsselaere, senior director – finance, risk and regulatory reporting value propositions at Wolters Kluwer, explores the key steps to…
A contested result was unexpected, but scenario planning meant banks weren’t unprepared
OpRisk North America: anchoring idiosyncratic risks to macro scenarios a challenge, say experts
This paper deals with the modeling of trading activity on the European electricity intraday market by a self-exciting point process.
Industry leaders discuss the increased value of stress-testing in a world rocked by its second financial crisis in 12 years, the likely emergence of non-financial risks, and how financial institutions can establish efficient and effective stress-testing…
The authors investigate the performance of various value-at-risk (VaR) models in the context of the highly volatile Nordic power futures market, examining whether simple averages of models provide better results than the individual models themselves.
Use cases for new tech are piling up – from CVA to VAR. But so are the obstacles
The authors propose a novel framework for credit risk modeling, where default or failure information and rating or expert information are jointly incorporated in the model.
Standardising stress drivers could help smooth differences between bank loss estimates