Original research
Distance to default based on the CEV–KMV model
The author applies the CEV process to the KMV model in order to assess default risk, finding that this method improves forecasting ability.
Model risk quantification based on relative entropy
This paper proposes a minimum relative entropy technique for challenging derivatives pricing models that can also assess the model risk of a target portfolio.
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.
A multivariate model for hybrid wind–photovoltaic power production with energy portfolio optimization
The authors model the power production and income of a wind-photovoltaic energy plant to determine the portfolio that maximises profitability as well as the optimal choice between wind and photovoltaic plants.
Stressing of migration matrixes for International Financial Reporting Standard 9 and Internal Capital Adequacy Assessment Process calculations
This paper demonstrates that correlation estimates are sensitive to model assumptions and estimation methodology by comparing three methods used to stress rating transition matrixes.
Generalized additive modeling of the credit risk of Korean personal bank loans
The authors demonstrate a nonlinear impact of loan and borrower characteristics when applying a GAM framework to personal loans taken from a Korean bank.
Stressed distance to default and default risk
The authors propose a stressed version of distance to default to measure time-varying corporate default risk in the event of a systematic stress scenario.
Quantifying model selection risk in macroeconomic sensitivity models
The authors compare forecasts and uncertainties of three possibilities in model selection: the model selected as best, the best ensemble and the model not selected.
A two-component realized exponential generalized autoregressive conditional heteroscedasticity model
The authors propose a two-component EGARCH model for the modeling of asset returns and realized measures of volatility.
Shrinking beta
The authors shrink correlation and volatility separately and evaluate the predictive power of this approach, finding economically and statistically significant gains from applying more shrinkage to correlations than to volatilities.
Do DEXs work? Using Uniswap V2 to explore the effectiveness of decentralized exchanges
The authors investigate the effectiveness of the Ether–Tether liquidity pool on the Uniswap V2 and note that cointegration between the price set by the liquidity pool and its price elsewhere is a necessary condition of effectiveness.
Dynamic spillover between the crude oil, natural gas and BRICS stock markets
This paper investigates the dynamic spillover between crude oil, natural gas and the stock markets in Brazil, Russia, India, China and South Africa (BRICS).
Choice of margin period of risk and netting for computing margins in central counterparty clearinghouses: a Monte Carlo investigation
The authors provide a quantitative comparison for evaluating the impact of collecting margins in a gross-versus-net system with the margin period of risk (MPOR) set to between one and five days.
Forecasting the European Monetary Union equity risk premium with regression trees
The authors use EMU data from the period between 2000 to 2020 to forecast equity risk premium and investigate Classification and Regression Trees.
Optimal trade execution with uncertain volume target
This paper demonstrates that risk-averse traders can benefit from delaying trades using a model that accounts for volume uncertainty.
A novel derivation and interpretation of the Kelly criterion
The authors apply an information-theoretical argument to a Bernoulli process to find least biased investment strategy consistent with expected exponential growth.
A three-factor hazard rate model for single-name credit default swap pricing
The authors propose a reduced-form model in which the evolution of the risk-neutral hazard rate is driven by three risk factors.
Repo haircuts and economic capital: a theory of repo pricing
The author proposes a repo haircut model that will identify capital for repo default risk as the main driver of repo spreads and allow investors to settle at an optimal combination of the haircut and repo rate.
Exploring the equity–bond relationship in a low-rate environment with unsupervised learning
The authors apply k-means clustering to low interest rate periods in order to analyze the equity hedging property of government bonds.
Merton’s model with recovery risk
By adding a correlated risk driver to Merton's model for corporate bond pricing, the authors model the empirically observed recovery risk premium.
A general firm value model under partial information
The authors propose a general structural default model combining enhanced economic relevance and affordable computational complexity.
General bounds on the area under the receiver operating characteristic curve and other performance measures when only a single sensitivity and specificity point is known
Using a single true positive - true negative pair, the author shows how to calculate the area under a ROC curve.
Do sovereign wealth funds dampen the effect of oil market volatility on gross domestic product growth?
This paper uses a smooth transition regression model to examine the role of SWF asset growth in lessening the effect of oil market volatility on GDP growth.
Application of the moving Lyapunov exponent to the S&P 500 index to predict major declines
The authors suggest an innovative method based in econophysics that provides early warning signs for major declines in the S&P 500 Index