Original research
Estimating correlation parameters in credit portfolio models under time-varying and nonhomogeneous default probabilities
This paper proposes new maximum likelihood estimation methods that offer greater flexibility than current methods and can account for finite portfolio sizes, scarce default data and time varying, nonhomogeneous default probabilities.
Sovereign probabilities of default in the euro area
This paper decomposes credit default swap spreads of euro area members into their risk premium and default risk elements and forecast one year probabilities of default.
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.
The Compliance Index: a behavioral approach to compliance risk management in the (post-) Covid-19 era
This paper proposes the Compliance Index - a behavioral measurement system for controlling and monitoring the effectiveness of compliance programs to mitigate compliance risk - designed in response to the shift to remote working during the Covid-19…
Nonparametric estimation of systemic risk via conditional value-at-risk
The authors propose four new nonparametric estimators of static CoVar and compare their performance in simulation studies.
Energy trading efficiency in ERCOT’s day-ahead and real-time electricity markets
This paper uses hourly prices to study energy trading efficiency in ERCOT's electricity markets and proposes means to improve trading efficiency and investment inventive.
Measuring the effect of corrective short-term updates for wind energy forecasts on intraday electricity prices
This paper investigates the impact of wind energy updates on intraday prices and proposes the use of merit-order-based models to counter price uncertainties stemming from updates.
Risks of long-term auto loans
The authors investigate the borrower risk factors, delinquency rates, yield curves, and interest rates of long-term auto loans.
Forecasting the realized volatility of stock markets with financial stress
This paper investigates the impact of financial stress on the predictability of the realized volatility of five stock markets
Counterparty risk allocation
This paper investigates the problem of minimizing the risk of exposure to a small number of defaultable counterparties based on spectral risk measures.
Risk contagion and bank stability: the role of credit risk and liquidity risk
The authors put forward a systemic risk measurement model and measure systemic risk in China's banking sector for the period 2013-18.
Model risk in mortality-linked contingent claims pricing
The authors investigate the influence of model risk on pricing life products and demonstrate that classical Lee-Carter-type models can be less accurate than the proposed model.
Is volatility a friend or enemy of your stock and fund investments?
The authors investigate the role of past volatility in the cross section of returns on US stocks, equity mutual funds and corporate bond funds.
Islamic mutual funds: contracts, structures, screening and pricing mechanisms
The authors investigate the contracts, structures, screening, pricing mechanisms of Islamic Mutual Funds and attempt to harmonize and standardize the benchmarks of these funds
Quantification of model risk with an application to probability of default estimation and stress testing for a large corporate portfolio
This paper discusses the building of obligor-level rather than segment-level hazard rate corporate probability of default models for stress testing.
The statistics of capture ratios
This paper investigates the statistical problem of estimating the capture ratio based on a finite number of observations of a fund’s returns.
Adjoint differentiation for generic matrix functions
The authors develop and apply a formula to derive closed-form expressions in particular quantitative finance cases.
Simulating the Cox–Ingersoll–Ross and Heston processes: matching the first four moments
This paper investigates various techniques for the CIR and Heston models.
How does the pandemic change operational risk? Evidence from textual risk disclosures in financial reports
The authors investigate changes in operational risk profiles of the financial industry following the Covid-19 pandemic.
Multilevel Monte Carlo simulation for VIX options in the rough Bergomi model
The authors consider the pricing of the Chicago Board options Exchange VIX, demonstrating experiments highlighting the efficiency of a multilevel approach in pricing of VIX options.
Modeling systemic operational risk in the Covid-19 pandemic
This paper introduces existing and novel epidemiology models and investigates how government responses to the Covid-19 pandemic impacted these models.
Pricing the correlation skew with normal mean–variance mixture copulas
The author puts forward a pricing methodology for European multi-asset derivatives that consists of a flexible copula-based method that can reproduce the correlation skew and is efficient enough for use with large baskets.
Creating factor clusters in the alternative Undertakings for Collective Investment in Transferable Securities (UCITS) universe
The authors identify 7 clusters and provide insight into their current or prospective UCITS holdings by observing their performance in the context of the relevant cluster.
Changes in operational risk and its determinants under Covid-19
The authors investigate the operational risk impact of the Covid-19 pandemic on Chinese commercial banks and the moderating effect of bank size, business diversification and regulatory records.