Technical paper/Risk management
One bad apple: default risk at CCPs
One clearing member's disproportionately large position increases the credit risk for all CCP members
A triptych approach for reverse stress testing of complex portfolios
Pascal Traccucci et al present an extended reverse stress test triptych approach with three variables
The minimally biased backtest for ES
Acerbi and Szekely present a backtest for expected shortfall
Capital allocation under the Fundamental Review of the Trading Book
Quants propose an allocation method for internal model capital charges
The fair basis
Wujiang Lou remodels credit arbitrage by introducing funding and capital costs
Revisiting SA-CCR
Berrahoui, Islah and Kenyon propose an alternative to SA-CCR
Central counterparty CVA
Matthias Arnsdorf proposes a method to calculate the counterparty risk related to CCP membership
Tying allocation to selection
Hamza Bahaji introduces a new approach to core-satellite investing, the compound portfolio insurance
CVA and IM: welcome to the machine
Henry-Labordere proposes a neural networks-based technique to price counterparty risk and initial margin
Keep it real: tail probabilities of compound distributions
Igor Halperin proposes new approach to compute probabilities of heavy-tailed distributions
The revised P&L attribution test and the suitability of new proposed thresholds
Montoro, Spinaci and Georgi assess the effectiveness of the FRTB’s P&L attribution test
Curve dynamics with artificial neural networks
Artificial neural networks can replace PCA for yield curves analysis
Rogue traders versus value-at-risk and expected shortfall
VAR and ES are ineffective to deter rogue trading
The FRTB’s P&L attribution-based eligibility test: an alternative proposal
Spinaci, Benigno, Fraquelli and Montoro propose two alternatives to the P&L attribution test
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
Calibrating Heston for credit risk
Marco de Innocentis and Sergei Levendorskiĭ describe a faster and more accurate method for market-implied calibration of the Heston model
Haircutting non-cash collateral
Wujiang Lou develops a parametric haircut model to conduct sensitivity tests and capture market liquidity risk
Extremely (un)likely: a plausibility approach to stress testing
CCP’s risk managers propose a framework for generating extreme but plausible stress scenarios
Trading lightly: cross-impact and optimal portfolio execution
A liquidity model for basket of correlated securities is presented
Stress hedging in portfolio construction
Bilgili, Ferconi and Ulitsky propose a constrained portfolio optimisation approach incorporating stress scenarios
A sound modelling and backtesting framework for forecasting initial margin requirements
Anfuso, Aziz, Loukopoulos and Giltinan propose a method to develop and backtest forecasting models for IM
Does initial margin eliminate counterparty risk?
Andersen, Pykhtin and Sokol show the existence of residual exposure after initial margin posting
XVA at the exercise boundary
Andrew Green and Chris Kenyon show how the decision to exercise an option is influenced by XVAs
Identification and capitalisation of non-modellable risk factors
Adolfo Montoro, Tim Becker and Lars Popken propose techniques for systematically capturing and categorising non-modellable risk factors and risk-adequate aggregation