Monte Carlo simulation
An explicit scheme for pathwise cross valuation adjustment computations
The authors put forward a simulation/regression scheme for a class of anticipated backward stochastic differential equations, where the coefficient entails a conditional expected shortfall of the martingale part of the solution.
The WWR in the tail: a Monte Carlo framework for CCR stress testing
A methodology to compute stressed exposures based on a Gaussian copula and mixture distributions is introduced
CCP models vulnerable to Trump risk
Volatility of ‘will he, won’t he’ tariff strategy could confound clearing house risk models
Operational risk modeling under the loss distribution approach: estimation of operational risk capital by business line versus risk category
The authors apply the loss distribution approach to operational risk data, contributing to understandings of the composition and distribution of operational risk data across risk classes and the corresponding operational risk capital requirements
Overcoming Markowitz’s instability with hierarchical risk parity
Portfolio optimisation via HRP provides stable and robust weight estimates
Pricing time-capped American options using a least squares Monte Carlo method
This paper uses a modified least squares Monte Carlo method to price time-capped American options.
Kernel-based estimation of spectral risk measures
The authors put forward a kernel-based estimator for spectral risk measures and compare its performance with existing SRM estimators.
CVA sensitivities, hedging and risk
A probabilistic machine learning approach to CVA calculations is proposed
Bridging the gap risk reloaded: modelling wrong-way risk and leverage
A model extends the counterparty risk calculation to include nonlinear and complex portfolios
A simple local correlation model
This paper puts forward a novel kind of "local-in-index" model which allows easier computation of Greeks.
US climate guidance stokes debate over defining material risks
Banks welcome flexibility, but it could lead to big divergence on climate risk management
Climate capital in the balance as EBA rejects green risk weights
European regulator suggests climate change must be factored into existing risk categories
Hedging of financial derivative contracts via Monte Carlo tree search
This paper applies the Monte Carlo tree search as a method for replication in the presence of risk and market friction
The importance of being scrambled: supercharged quasi-Monte Carlo
The authors propose a randomized quasi-Monte Carlo method which outperforms both the Monte Carlo and standard quasi-Monte Carlo methods.
Toward a unified implementation of regression Monte Carlo algorithms
The authors put forward a publicly available computational template for machine learning, named mlOSP, which presents a unified numerical implementation of RMC approaches for optimal stopping.
A general control variate method for time-changed Lévy processes: an application to options pricing
The authors put forward a novel control variate method for time-changed Lévy models and demonstrate an efficient reduction of the variance of Monte Carlo in numerical experiments.
The quintic Ornstein-Uhlenbeck model for joint SPX and VIX calibration
A new model that jointly fits the smiles of VIX and SPX is presented