Technical paper

Detecting market abuse

Financial regulators need a way to detect market abuse in real time. Marcello Minenna has developed such a procedure that can detect, for each quoted stock and on a daily basis, the presence of market abuse phenomena by means of a set of tripwires that…

Maximum likelihood estimate of default correlations

Estimating asset correlations is difficult in practice since there is little available data andmany parameters have to be found. Paul Demey, Jean-Frédéric Jouanin, Céline Roget andThierry Roncalli present a tractable version of the multi-factor Merton…

Mixed default modelling

Structural and reduced-form models are two well-established approaches to modelling afirm’s default risk. Here, Li Chen, Damir Filipovic/ and Vincent Poor develop a new default riskmodelling strategy based on combining these two frameworks in order to…

Incorporating policyholder expectations into ALM

European life insurers have recently improved their asset/liability management (ALM) skills.However, those efforts have been limited to the matching of guaranteed policyholder benefits.While bringing considerable insight, they also leave management with…

Earnings at risk

The structure of a typical energy portfolio often contains a different assetand contract mix from the simple derivatives instruments in a more standard portfolio.This requires a different approach to risk. Here, Les Clewlow and ChrisStrickland make the…

In the core of correlation

The single-factor Gaussian copula model has become a benchmark for the pricing and risk management of basket credit derivatives and synthetic CDO tranches. However, recent months have seen the development of a market for tranched synthetic indexes,…

Detecting market abuse

Financial regulators need a way to detect market abuse in real time. Marcello Minenna has developed such a procedure that can detect, for each quoted stock and on a daily basis, the presence of market abuse phenomena by means of a set of tripwires that…

Maximum drawdown

The maximum loss from a market peak to a market nadir, commonly called the maximum drawdown (MDD), measures how sustained one’s losses can be. Malik Magdon-Ismail and Amir Atiya present analytical results relating the MDD to the mean return and the…

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