Value-at-risk (VAR)
Curbing rogue behaviour
Regulators should try to combat rogue trading by measuring traders’ risk-taking differently, say quants
A central limit theorem formulation for empirical bootstrap value-at-risk
In this paper, the importance of the empirical bootstrap (EB) in assessing minimal operational risk capital is discussed, and an alternative way of estimating minimal operational risk capital using a central limit theorem (CLT) formulation is presented.
The validation of filtered historical value-at-risk models
In this paper, the authors examine the problem of validating and calibrating FHS VaR models, focussing in particular on the Hull and White (1998) approach with EWMA volatility estimates, given its extended use in the industry.
Quants needed: how finance can use power of quantum tech
New machines have big potential in AI, valuations and VAR, but tech giants like IBM need help from practitioners
Optimal equity protection of Solvency II regulated portfolios
In the context of equity investments, this paper examines the relationship between the cost of acquiring protection (in the form of put option) and the reduction of capital charges that it entails. The paper develops the idea that Solvency II regulations…
Valuing streams of risky cashflows with risk-value models
Based on risk-value models this paper introduces a multi-period approach to the valuation of streams of risky cash flows.
Initial margin with risky collateral
This paper explores the complication of calculating the IM amount requirement when collateral comprises risky assets in a parametric VaR framework. The authors show that the required IM amount can be calculated by solving a quadratic inequality.
Estimation risk for value-at-risk and expected shortfall
This paper provides a detailed analysis of the relationship between approximate VaR (ES) and exact VaR (ES) by finding a linear regression model in which the response variable is the approximate VaR (ES) and the explanatory variable is the exact VaR (ES)…
Ex-Fed trader Coffey on macro risks and VAR
Myopic models are creating feedback loops, warns founder of new macro firm Avoca
New historical bootstrap value-at-risk model
This paper presents a new value-at-risk (VaR) model for the estimation of market risk in banks and other financial institutions.
Optimising VAR and terminating Arnie-VAR
Albanese, Caenazzo and Syrkin show how full-revaluation VAR is more accurate and robust than sensitivity-based VAR measures
Unskewed incentives: making governance work
EIB model head explains a four-step process for putting risk at the centre of governance efforts
The bald truth about collateral haircut modelling
HSBC’s Wujiang Lou says parametric modelling of haircuts has many advantages over historical VAR
Inefficiency and bias of modified value-at-risk and expected shortfall
This paper compares mVaR and mES estimators with VaR and ES under normal and fat tailed t-distributions.
Comparing multivariate volatility forecasts by direct and indirect approaches
This paper investigates direct and indirect volatility evaluations in the multivariate framework by means of a Monte Carlo simulation
Risk management for private equity funds
This paper aims to fill a gap in the literature by developing the first comprehensive risk management framework for private equity fund investments.
A balanced approach to central counterparty margining
This paper is meant to serve as a comparison of the approaches and margin models employed by CCPs.
Performance testing of margin models using time series similarity
This paper proposes a performance test based on empirical similarity that would account for margin shortfall, procyclicality and efficiency in a single score.
CCP margin backtests can hide flaws, research finds
In richer test, ‘filtered’ VAR beats five other measures
XVA reaches far and wide
Sponsored Q&A: CompatibL, Murex and Numerix
Primary-firm-driven portfolio loss
This paper describes a simple model that can be used for risk management.
A note on the statistical robustness of risk measures
This paper focuses on the parametric estimators of risk measures and uses Hampel’s infinitesimal approach to derive the robustness properties.
Modeling impacts of stock jumps on real estate investment trust returns with application to value-at-risk
This paper aims to model the impact of extreme stock jumps on REIT returns.
FRTB Special Report 2017
Confronting the challenges of FRTB in P&L attribution, non-modellable risk factors and technology