Journals
Modeling catastrophic operational risk using a compound Neyman–Scott clustering model
In this paper, the authors discuss the hazard generated by OpRisk driven by natural and human-made disasters, and argue the position of the LDA as the most-fitted statistical approach to deal with it.
Distributed ledger technology in payments, clearing and settlement
This paper examines how DLT can be used in the area of PCS, and identifies both the opportunities and challenges associated with its long-term implementation and adoption.
Risk mutualization and financial stability: recovering and resolving a central counterparty
This paper investigates how financial market participants respond to risk mutualization implemented by a CCP using assessments after a large credit loss.
SPEI’s diary: econometric analysis of a dynamic network
This paper identifies the determinants behind the dynamics of the real-time settlement payment system in Mexico, SPEI, during the period January 2005–December 2015.
Mostly prior-free asset allocation
This paper develops a prior-free version of Harry Markowitz’s efficient portfolio theory, which allows the decision maker to express their preferences with regard to risk and reward, even though they are unable to express a prior over potentially…
A copula approach to credit valuation adjustment for swaps under wrong-way risk
This paper deals with the credit valuation adjustment (CVA) of interest rate swap (IRS) contracts in the presence of an adverse dependence between the default time and interest rates: so-called wrong-way risk (WWR).
When do central counterparties enhance market stability?
This paper examines the impact of market structure and payment assumptions on the fragility of various networks.
The impact of unconventional monetary policy shocks on the crude oil futures market
This paper examines how West Texas Intermediate (WTI) crude oil price returns and volatilities respond to changes in US monetary policy.
Adjoint algorithmic differentiation tool support for typical numerical patterns in computational finance
This paper demonstrates the flexibility and ease in using C++ algorithmic differentiation (AD) tools based on overloading to numerical patterns (kernels) arising in computational finance.
Monte Carlo payoff smoothing for pricing autocallable instruments
This paper develops a Monte Carlo method to price instruments with discontinuous payoffs and non-smooth trigger functions, which allows a stable computation of Greeks via finite differences.
The quickest way to lose the money you cannot afford to lose: reverse stress testing with maximum entropy
This paper extends a technique devised by Saroka and Rebonato to “optimally” deform a yield curve in order to deal with a common and practically relevant class of optimization problems subject to linear constraints.
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.
Central counterparty resolution: an unresolved problem
This paper describes the current policy for recovery and resolution of CCPs and assesses the tool kit for resolution of them.
Nonlinear relationships in a logistic model of default for a high-default installment portfolio
This paper uses data on consumer credit along with generalized additive models to analyze nonlinear relationships and their effect on predicting the probability of default in the context of consumer credit scoring.
A risk-sensitive approach for stressed transition probability matrixes
In this paper, the authors outline a simulation-based methodology for the generation of stressed transition probability matrixes under the structural credit risk framework.
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.
The threat of privacy
This paper is the text of a keynote address by Charles M. Kahn, presented at the Financial Market Infrastructure Conference II: New Thinking in a New Era.
Evaluating the role of risk networks in risk identification, classification and emergence
This paper presents an evaluation of how risk interdependence affects the risk management process.
The impact of de-tiering in the United Kingdom’s large-value payment system
The authors conduct a head-to-head comparison of central and bilateral clearing to evaluate the impact of market structure on market stability.
Interconnectedness risk and active portfolio management: the information-theoretic perspective
This paper extensively compares mutual-information-based networks with correlation-based networks on a stand-alone basis and in the framework of active investment strategies.
Optimal investment and financing with macroeconomic risk and loan guarantees
This paper considers an entrepreneur who has no assets in place but possesses an option to invest in a project incurring a lump-sum investment cost, of which a fraction must be financed by entering into an equity-for-guarantee swap.
A latent variable credit risk model comprising nonlinear dependencies in a sector framework with a stochastically dependent loss given default
This paper proposes a latent variable credit risk model for large loan portfolios. It employs the concept of nested Archimedean copulas to account for both a sector-type dependence structure and a copula-dependent stochastic loss given default (LGD).
The profit-and-loss attribution test
In this paper, the authors analyze the failure probabilities of the profit-and-loss attribution (PLA) test as defined in the final market risk standard published in January 2016 by the Basel Committee on Banking Supervision.