Technical paper
Benchmark reform goes non-linear
Terminating Libor will bring great challenges to the pricing of non-linear rate products
Network sensitivity of systemic risk
Here, we address the more general problem of how shock propagation dynamics depend on the topological details of the underlying network. To this end, we consider different realistic network topologies, all consistent with balance sheet information…
A k-means++-improved radial basis function neural network model for corporate financial crisis early warning: an empirical model validation for Chinese listed companies
This paper aims to simplify the early warning model for financial crises by collecting and analyzing the financial data of Chinese special treatment (ST) companies, normally listed companies and cancel special treatment (CST) companies.
Elliptical and Archimedean copula models: an application to the price estimation of portfolio credit derivatives
This paper explores the impact of elliptical and Archimedean copula models on the valuation of basket default swaps.
The use of range-based volatility estimators in testing for Granger causality in risk on international capital markets
This study utilizes the extreme value theory (EVT) approach to compare the performance of a wide variety of range-based volatility estimators in the analysis of causality in risk between emerging and developed markets.
The data anonymiser
Non-parametric approaches anonymise datasets while reproducing their statistical properties
Neural networks for option pricing and hedging: a literature review
This paper provides a comprehensive review of the field of neural networks, comparing articles in terms of input features, output variables, benchmark models, performance measures, data partition methods and underlying assets. Related work and…
Economic policy uncertainty, investors’ attention and US real estate investment trusts’ herding behaviors
Using a quantile regression model, this study examines economic policy uncertainty and investors’ attention for policy risk on US real estate investment trusts’ (REITs’) herding behaviors.
Benchmarking operational risk stress testing models
This paper outlines several approaches to benchmarking operational loss projections under stressed scenarios using both accounting metrics and historical loss experience.
Eigenportfolios of US equities for the exponential correlation model
In this paper, the eigendecomposition of a Toeplitz matrix populated by an exponential function in order to model empirical correlations of US equity returns is investigated.
Dynamic refinement of the term structure: time-homogeneous term structure modeling
The author considers a classical term structure model framework, ie, a Heath–Jarrow–Morton framework, on a time-discrete tenor, such as the London Interbank Offered Rate market model, using a sequence of tenor discretizations, where the tenors are valid…
The econophysics of asset prices, returns and multiple expectations
The author models interactions between financial transactions and expectations and describe asset pricing and return disturbances.
Detecting changes in asset co-movement using autoencoders
ARR aims to anticipate volatility patterns to provide signals for risk management and trading
Gaussian process regression for derivative portfolio modeling and application to credit valuation adjustment computations
The authors present a multi-Gaussian process regression approach, which is well suited for the over-the-counter derivative portfolio valuation involved in credit valuation adjustment (CVA) computation.
A new arbitrage-free parametric volatility surface
A new arbitrage-free volatility surface with closed-form valuation and local volatility is introduced
Optimal dynamic strategies on Gaussian returns
It is hoped that this paper will form a foundational approach to the study of dynamic strategies and how to optimize them. We make efforts to understand their properties without claiming to understand why they work (ie, why there are stable…
What is essential is invisible to the eye: prioritizing near misses to prevent future disasters
Near misses represent a primary information source to analyze the operational risk exposure of a company, since they can reveal gaps in the control environment. The model proposed in this paper aims at identifying the most dangerous events that could…
Libor replacement II: completing the generalised FMM
The FMM is upgraded to model the full term structure, pricing all possible bonds and the bank account
IFRS 9 compliant economic adjustment of expected credit loss modeling
This paper presents an International Financial Reporting Standard 9 (IFRS 9) compliant solution related to expected credit loss modeling.
Is trading indicator performance robust? Evidence from scenario building
This paper challenges widely applied trading indicators with regard to their ability to generate a robust performance.
High-order approximations to call option prices in the Heston model
In the present paper, a decomposition formula for the call price due to Alòs is transformed into a Taylor-type formula containing an infinite series with stochastic terms. The new decomposition may be considered as an alternative to the decomposition of…
Strategic and technology risks: the case of Co-operative Bank
This paper studies the growth by acquisition strategy embarked upon by a mid-sized UK bank, the Co-operative Bank; this strategy was a disaster, leaving a heretofore successful bank in dire trouble and on the block for buyers at a substantial discount to…
An emergent taxonomy for operational risk: capturing the wisdom of crowds
In this paper, the author takes a data-driven approach and combines the individual active taxonomies of sixty large financial institutions (fifty-eight for construction and two for validation) to create a coherent new reference taxonomy: the ORX…
Covid-19 and the credit cycle
The Covid-19 health crisis has dramatically affected just about every aspect of the economy, including the transition from a record long benign credit cycle to a stressed one, with still uncertain dimensions. This paper seeks to assess the credit climate…