Technical paper/Modelling
The relative entropy of expectation and price
The replacement of risk-neutral pricing with entropic risk optimisation
A three-stage fusion model for predicting financial distress considering semantic and sentiment information
The authors apply sentiment analysis to management discussion and analysis texts to aid the prediction of financial distress with an innovative three-phase fusion model.
Lessons for academic research from model risk management in financial institutions
The authors suggest that model risk management practices used in financial institutions can be applied to academic research and enhance research outcomes.
Litigation risk assessment: a novel quantitative recency–frequency–monetary model
The authors assess litigation risk and credit risk of companies and investigate interrelationships between these risks, finding a correlation between them.
Machine learning prediction of loss given default in government-sponsored enterprise residential mortgages
The authors apply machine learning techniques to Loss Given Default estimation, identifying key variables in LGD prediction and evaluating the performance of various models.
How is risk culture conceptualized in organizations? The pan-industry risk culture (PIRC) model
This paper puts forward a pan-industry risk culture as a framework through which to proactively manage risk culture.
Financial distress prediction with optimal decision trees based on the optimal sampling probability
The authors propose and validate a tree-based ensemble model for financial distress prediction which is demonstrated to outperform comparative models.
Estimating the probability of insurance recovery in operational risk
The authors put forward a novel methodology for the estimation of probability of insurance recovery.
Forecasting the default risk of Chinese listed companies using a gradient-boosted decision tree based on the undersampling technique
The authors put forward a model for default prediction designed to minimise the impact of imbalanced classification, verifying its effectiveness with real world data from Chinese listed companies.
A two-stage nonlinear approach for modeling hourly spot power prices with an application to spot market risk valuation of the power yield of a solar array in Germany
This paper combines a seasonal autoregressive moving average model with a Markov regime-switching model approach for power spot prices, allowing intraday and weekly seasonalities to be incorporated.
The factor Heath-Jarrow-Morton term structure
A framework for rates that links real-world and risk-neutral measures is presented
Instabilities in Cox proportional hazards models in credit risk
The authors explore possible instabilities in applying Cox PH models and conduct numerical studies to demonstrate the same linear specification error from APC models an occur in Cox PH estimation.
Value-at-risk models: a systematic review of the literature
The authors conduct a systematic literature review of value-at-risk models to determine which models are most often used and whether any change in model popularity occurred after the 2007-9 financial crisis.
Modeling maxima with a regime-switching Fréchet model
The authors identify a regime-switching Fréchet model which can be used to identify the behavior of extreme values in financial series.
Modeling very large losses. II
This paper presents a means to estimate very large losses by supposing the event is the result of a succession of factors and estimating the probability of each factor.
Analytical conversion between implied volatilities based on different dividend models
The authors propose an explicit formula for the conversion of implied volatilities corresponding to dividend modelling assumptions which covers a wide range of strikes and maturities.
An effective credit rating method for corporate entities using machine learning
The authors propose a new method to design credit risk rating models for corporate entities using a meta-algorithm which exploits information embedded in expert-assigned credit ratings to rank customers.
Optimal exercise of callable bonds
Citi quants and structurers present a term-structure model for callable bonds' work
A general firm value model under partial information
The authors propose a general structural default model combining enhanced economic relevance and affordable computational complexity.
Ruin problems in a discrete risk model in a Markovian environment
This paper finds that the derivations in a previous paper by Yang et al (2019) are erroneous, and analyzes the risk model model correctly using the matrix analytic method.
Strong-hand conjecture: agent-based numerical simulation
Following the example of the Kim–Markowitz model, this study adopts similar mechanisms of market operation to perform computer simulations based on agent modeling on the financial market, where shares of one company and a bank account are available …