Bayesian modelling
We will shock you: a coherent Bayesian approach for stress testing
The authors propose a novel coherent Bayesian stress test method which preserves the mathematical properties of the risk measures.
Bayesian backtesting for counterparty risk models
Utilising Bayesian methods, the authors put forward a new means for counterparty risk model backtesting which is both simple to implement and conceptually sound.
Scenario design for macrofinancial stress testing
The author presents an empirical approach to scenario design for selecting a stress scenario for international macrofinancial variables and compares this approach with a historical scenario approach.
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.
Interpolating commodity futures prices with Kriging
A futures price’s term structure is built to account for trends and seasonality effects
Quants see promise in Bayesian machine learning
Risk USA: probability theory may hold key to creating ‘self-aware’ AI
Bayesian nonparametric covariance estimation with noisy and nonsynchronous asset prices
This paper introduces a Bayesian nonparametric method to estimate the ex post covariance matrix from high-frequency data.
Decomposing supply shocks in the US electricity industry: evidence from a time-varying Bayesian panel vector autoregression model
This paper investigates spillovers between electricity supply shocks and US growth, using monthly data from forty-eight US states from January 2001 to September 2016, and employs a novel strategy for electricity supply shocks based on a time-varying…
Quantifying systemic risk using Bayesian networks
Creditworthiness of individual entities may offer an insight into systemic risk of financial markets
Estimating marginal effects of key factors that influence wholesale electricity demand and price distributions in Texas via quantile variable selection methods
Using a large data set from the Electric Reliability Council of Texas, this study uses quantile regressions and attendant variable selection methods to choose the most important factors that influence demand and price distributions; subsequently, the…
Static and dynamic risk capital allocations with the Euler rule
This paper studies the volatility of the Euler rule for capital allocation in static and dynamic empirical applications with a simulated history.
A note on the standard measurement approach versus the loss distribution approach–advanced measurement approach: the dawning of a new regulation
This paper presents a nonexhaustive review of the literature on operational risk quantification under a combination of the loss distribution approach model – the most commonly used of the AMA models – and extreme value theory.
Bayesian analysis in an aggregate loss model: validation of the structure functions
This paper considers the empirical evaluation of a collective risk model with the geometric as the primary distribution and the exponential as the secondary distribution.
Why risk aversion should be built into product structuring
Irrational behaviours that creep into product structuring can be controlled mathematically
Elasticity theory of structuring
Andrei Soklakov presents a product design theory that incorporates Bayesian information processing and risk aversion
A correlated structural credit risk model with random coefficients and its Bayesian estimation using stock and credit market information
Using historical equity and credit market data, this paper illustrates the validation of a structural correlated default model applied to Black–Cox setups.
The econometrics of Bayesian graphical models: a review with financial application
This paper provides a review of graphical modeling and describes potential applications in econometrics and finance.
Comparing alternative mixing models for external operational risk data
Mixing, not scaling, best approach for using external losses
Bayesian synthesis of portfolio credit risk with missing ratings
This paper uses a maximum likelihood estimation to assess the projected average default rates of debt portfolios.
Data provider of the year: StatWeather
StatWeather impresses energy traders with long-range forecasts