Technical paper
Sign prediction and sign regression
This paper proposes an approach whereby the loss function regularizes the errors in prediction in different ways.
Penalty methods for bilateral XVA pricing in European and American contingent claims by a partial differential equation model
Under some assumptions, the valuation of financial derivatives, including a value adjustment to account for default risk (the so-called XVA), gives rise to a nonlinear partial differential equation (PDE). The authors propose numerical methods for…
The impact of culture upon operational risk management guidelines in the banking sector of selected Asian countries
The central banks of different countries regulate ORM according to the specificities of their national banking industry. This paper tests the hypothesis that such regulatory openness results in legal texts that are highly influenced by the culture of the…
Gradient boosting for quantitative finance
In this paper, the authors discuss how tree-based machine learning techniques can be used in the context of derivatives pricing.
Efficient representation of supply and demand curves on day-ahead electricity markets
The authors model the supply and demand curves of electricity day-ahead auctions in a parsimonious way by building an appropriate algorithm to present the information about electricity prices and demand with far fewer parameters than the existing…
Credit migration: generating generators
A stochastic time change helps the modelling of rating transition
Nowcasting networks
The authors devise a neural network-based compression/completion methodology for financial nowcasting.
From use cases to a big data benchmarking framework in clearing houses and exchanges
In this paper, we propose a conceptual framework that links the technical and business benchmarks in the domain of clearing houses and securities exchanges.
The selection of predictive variables in aggregate hydroelectric generation models
This paper provides a method to identify the best predictive variables and the appropriate predictive indexes for an aggregate hydropower storage forecasting model. To this end, we use an entropy-based approach.
Measurement of operational risk regulatory capital in the banking sector: developed countries versus emerging markets
This paper addresses operational risk as a fundamental risk type faced by banks in emerging and developed economies.
Neural network middle-term probabilistic forecasting of daily power consumption
The authors propose a new modeling approach that incorporates trend, seasonality and weather conditions as explicative variables in a shallow neural network with an autoregressive feature.
Impact of hedging strategies on variable annuities
Put options may reduce the cost of hedging strategies for insurers
Optimal foreign exchange hedge tenor with liquidity risk
The authors develop an optimal currency hedging strategy that allows fund managers who own foreign assets to choose the hedge tenors that will maximize their foreign exchange carry returns within a liquidity risk constraint.
Research on listed companies’ credit ratings, considering classification performance and interpretability
This study uses the correlation coefficient and F-test to select the initial features of a credit evaluation system, and then a validity index for a second selection to ensure that the feature system has the optimum ability to discriminate in determining…
Beyond the contract: client behavior from origination to default as the new set of the loss given default risk drivers
In this paper, we expand the modeling process by constructing a set of client-behavior-based predictors that can be used to construct more precise models, and we investigate the economic justifications empirically to examine their potential usage.
Bank supervision: lessons from the post-2008 banking crisis
This paper considers the learning points from official third-party reports produced in the wake of supervisory failures that can be applied to the management of front-line bank supervisors.
Regulatory arbitrage in the use of insurance in the new standardized approach for operational risk capital
Basel’s new standardized approach (SA) for operational risk capital may allow for regulatory arbitrage through the use of insurance. Under the SA, banks will likely have an incentive to insure recurring losses. Such insurance can meaningfully reduce…
Optimization of systemic risk: reallocation of assets based on bank networks
In this paper, the authors investigate the optimization of systemic risk based on DebtRank by considering two contagion channels: interbank lending and common asset holdings.
A review of the foreign exchange base currency approach under the standardized approach of the Fundamental Review of the Trading Book and issues related to the pegged reporting currency
When we adopt the parameters in the BCBS standards to calculate the delta risk charge, anomalies in the risk charges for the same risk exposure are found under different approaches and under different reporting currencies. The anomalies increase when the…
Bifractal receiver operating characteristic curves: a formula for generating receiver operating characteristic curves in credit-scoring contexts
This paper formulates a mathematical model for generating receiver operating characteristic (ROC) curves without underlying data.
SABR smiles for RFR caplets
The SABR model for volatility is adapted to price risk-free rate caplets
Forecasting Bitcoin returns: is there a role for the US–China trade war?
In this paper, the authors extend the related literature by examining whether the information on the US–China trade war can be used to forecast the future path of Bitcoin returns, controlling for various explanatory variables.
A verification model to capture option risk and hedging based on a modified underlying beta
This paper analyzes the relationship between option risk and expected return from the perspective of the underlying beta, and estimates the degree of correlation.