Original research
Correlated idiosyncratic volatility shocks
To capture the commonality in idiosyncratic volatility, the authors propose a novel multivariate generalized autoregressive conditional heteroscedasticity (GARCH) model called dynamic factor correlation (DFC).
What can we learn from what a machine has learned? Interpreting credit risk machine learning models
This paper studies a few popular machine learning models using LendingClub loan data, and judges these on performance and interpretability
Empirical validation of the credit rating migration model for estimating the migration boundary
In this paper, a structural model for credit rating migration is developed and validated, by which the migration boundary is recovered for the first time.
Measure twice before you cut: differences in Furfine-type algorithm implementations
This study focuses on the practical implementation aspects of “Furfine-type” algorithms used to identify money market loans from payments data.
Explaining credit ratings through a perpetual-debt structural model
This paper calibrates a perpetual-debt structural model (PDSM) by using Moody’s historical credit ratings.
A numerical approach to the risk capital allocation problem
The aim of this paper is to use a model-free, nonparametric approach based on the method of maximum entropy in the mean to solve the capital risk allocation problem.
Expansion method for pricing foreign exchange options under stochastic volatility and interest rates
This paper applies the smart expansion method to the Heston–Hull–White model, which admits stochastic interest rates to enhance the model, and obtains the expansion formula for pricing options in the model up to second order.
Ensemble methods for credit scoring of Chinese peer-to-peer loans
This study aims to conduct credit scoring by focusing on a Chinese P2P lending platform and selecting the optimal subset of features in order to find the best overall ensemble model.
Retail payments and financial inclusion in Latin America and the Caribbean: identifying gaps and opportunities
The payment aspects of financial inclusion (PAFI) framework, set up by the Committee on Payments and Market Infrastructures and the World Bank in 2016, recommends a set of actions to spur financial inclusion by means of improvements in the retail payment…
Small and medium-sized enterprises that borrow from "alternative" lenders in the United Kingdom: who are they?
This study provides a general overview of the external financing landscape for the UK SMEs and an exploratory analysis of the SME portfolio of one of the alternative lenders in the United Kingdom.
A simple and robust approach for expected shortfall estimation
This paper proposes a simple and robust expected shortfall estimation method based on the tail-based normal approximation.
An approach to simultaneously assess operational risk and maturity levels in information technology management
The aim of this paper is to investigate the operational risk and maturity level of IT in an anonymized financial institution, based on the American Productivity and Quality Center benchmark and control objectives for information and related technologies.
Procyclicality control in risk-based margin models
This paper revisits the procyclicality issue in risk-based margin models and provides additional insight on procyclicality mitigation techniques.
Risk governance, market competition and operational risk disclosure quality: a study of the ASEAN-5 banking sector
This paper investigates the impact of risk governance and market competition on banks' operational risk disclosure (ORD) quality (total and voluntary) in the Association of Southeast Asian Nations (ASEAN-5) banking sector
The effects of transaction costs and illiquidity on the prices of volatility derivatives
This paper employs a PDE approach to price several volatility derivatives under different transaction costs and illiquidity models.
Dynamic behavior of hydro/thermal electrical operators under an environmental policy targeting the preservation of ecosystem integrity and air quality
This paper analyzes the effect of an environmental policy targeting the enhancement of ecosystem integrity as well as air quality in the wholesale electricity market.
Addressing competitiveness of emissions-intensive and trade-exposed sectors: a review of Alberta's carbon pricing system
This paper assesses mechanisms used under the CCIR to address competitiveness-driven carbon leakage for emissions-intensive and trade-exposed sectors with a focus on Alberta’s oil and gas industry.
Zone-wide prediction of generating unit-specific power outputs for electricity grid congestion forecasts
This paper explores various statistical and statistical learning methods, with the goal of adequately predicting the on/off status and power output levels of all power plants within a control zone.
Option pricing using high-frequency futures prices
The authors examine two potential routes to improve the outcome of option pricing: extracting the variance from futures prices instead of the underlying asset prices, and calculating the variance in different frequencies with intraday data instead of…
Causality between oil prices and exchange rates: a quantile-on-quantile analysis
This study examines the causal link between the crude oil price and the exchange rate in five major oil-exporting countries (Saudi Arabia, Russia, Canada, the United Arab Emirates and the United States) that have recently adopted different exchange rate…
Corporate equity performance and changes in firm characteristics
The authors' findings affirm prior work illustrating the importance of profitability, size, liquidity, momentum and market returns, although we observe minimal evidence of the importance of investment in capital expenditures.
What drives the January seasonality in the illiquidity premium? Evidence from international stock markets
This study is, to the best of the authors’ knowledge, the first attempt to comprehensively examine and explain the January effect in the illiquidity premium.
Uncertain risk parity
This paper treats covariance as uncertain in order to find a risk parity weighting that does not count on perfectly optimized hedges and is robust to changes in regime.
The trade-off between liquidity risk and counterparty risk in money market networks
The authors examine how liquidity is exchanged in different types of Colombian money market networks (ie, secured, unsecured and the central bank’s repurchase networks) as registered in the local financial market infrastructure.