Technical paper
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
Deep learning for efficient frontier calculation in finance
The author puts forward a means to calculate the efficient frontier in the Mean-Variance and Mean-CVaR portfolio optimization problems using deep neural network algorithms.
Future portfolio returns and the VIX term structure
The authors use a measure that captures the expected evolution of risk and generate results supportive of the concept that there are multiple facets within volatility risk that are priced individually.
Linking performance of vanilla options to the volatility premium
A framework to account for vanilla options' performance in trading strategies is presented
Subsampling and other considerations for efficient risk estimation in large portfolios
The authors apply multilevel Monte Carlo simulation to the problems inherent in computing risk measures of a financial portfolio with large numbers of derivatives.
A new approach to detecting change in credit quality
The author presents a new, computationally simple framework for quantifying and detecting changes in established companies' corporate credit quality.
Detecting prudence and temperance in risk exposure: the hybrid variance framework
This paper analyses the correlations between returns and HVs in the short and long terms while developing a risk measure designed to contain the impacts of prudence and temperance on risk aversion.
How climate change may impact operational risk
This paper uses the ten laws of operational risk along with taxonomies for inadequacies or failures and their impacts, and it also draws parallels with past crises, in order to make systematic predictions.
Expected shortfall model based on a neural network
This paper presents a model that combines ES models based on EVT and neural networks and meets all criteria for the validity of the Basel III standard.
An end-to-end deep learning approach to credit scoring using CNN + XGBoost on transaction data
The authors find that machine learning methods can generate satisfactorily performing credit score models based on data from the 90-days prior to the score date, where traditional models can perform poorly.
Swap rate: cash-settled swaptions in the fallback
A fallback pricing method that reduces vanilla swaptions’ complexity is introduced
How a credit run affects asset correlation
This paper analyzes how soaring demand in the lending market shortly before a financial crisis can affect one of the main parameters in the internal ratings-based approach: the asset correlation.
Can we take the “stress” out of stress testing? Applications of generalized structural equation modeling to consumer finance
This paper provides a practical introduction to the GSEM statistical framework in risk management, and it illustrates the game-changing potential of this methodology with two empirical applications.
Semi-analytic conditional expectations
A data-driven approach to computing expectations for the pricing and hedging of exotics
Empirical research on the relationship between renewable energy consumption, foreign direct investment and economic growth in South Asia
This paper scrutinizes the link between renewable energy consumption, foreign direct investment (FDI) and economic progress in South Asian countries.
Correlations in operational risk stress testing: use and abuse
The paper presents an analysis of correlation effects of economic factors on the operational risk losses of a medium-large UK retail bank, and it recommends that causal factors that effect operational risk should be identified.
Procyclicality of central counterparty margin models: systemic problems need systemic approaches
In this paper the author argues that the focus on initial margin models is misplaced, and the reasons for this are illustrated by empirically testing the performance of standard initial margin models during the March 2020 events.
Trading strategies and weekly anomalies in the stock market: Mexico, Indonesia, Nigeria and Turkey
This paper explores the day-of-the-week impact and efficiency of the stock markets in Mexico, Indonesia, Nigeria and Turkey by using closing prices of a major index from each stock market.
The status of people risk management in UK banks
This paper examines how people risk is managed in banks using interview data obtained from operational risk management experts working in the UK banking sector.
Singular exotic perturbation
A solution based on local volatility and sensitivities is proposed to calculate exotics' prices
The customer settlement risk externality at US securities central counterparties
This paper highlights an externality in the clearing of customer securities trades, and it examines the potential benefits and costs of alternative clearing approaches.
Optimal turnover, liquidity and autocorrelation
A novel optimal execution approach via continuous-time stochastic processes is introduced
Does reinvesting payouts in plain vanilla exchange-traded funds enhance household portfolio performance?
This study analyzes whether reinvesting payouts in exchange-traded funds that replicate broad and internationally diversified market indexes enhances households’ portfolio performance after transaction costs.
The future of skew
Forward start volatility swaps and their pricing and hedging models are introduced