Technical paper
On the selection of loss severity distributions to model operational risk
This paper presents truncation probability estimates for loss severity data and a consistent quantile scoring function on annual loss data as useful severity distribution selection criteria that may stabilize regulatory capital.
Path independence of exotic options and convergence of binomial approximations
In this paper, the authors analyse the convergence of tree methods for pricing barrier and lookback options.
The standard market risk model of the Swiss solvency test: an analytic solution
This paper derives an alternative fast Fourier transform-based computational approach for calculating the target capital of the SST that is more than 600 times faster than a Monte Carlo simulation.
The use of business intelligence and predictive analytics in detecting and managing occupational fraud in Nigerian banks
The goal of this paper is to illustrate how Nigerian banks, and indeed banks elsewhere, can develop solutions that incorporate both BI and predictive analytics techniques in detecting, predicting, preventing and managing occupational fraud.
An advanced hybrid classification technique for credit risk evaluation
In this paper, the authors employ a hybrid approach to design a practical and effective CRE model based on a deep belief network (DBN) and the K-means method.
Levelling the playing field of the FRTB’s forex rules
Hany Farag argues that changing the base currency may address FRTB forex asymmetry
The minimally biased backtest for ES
Acerbi and Szekely present a backtest for expected shortfall
Dynamic volatility management: from conditional volatility to realized volatility
In this paper, the authors present a multiperiod portfolio management strategy that can be used to directly manage the realized volatility over a long time horizon.
Nonparametric versus parametric expected shortfall
In this paper, the authors use influence functions as a basic tool to study unconditional nonparametric and parametric expected shortfall (ES) estimators with regard to returns data influence, standard errors and coherence.
The efficiency of the Anderson–Darling test with a limited sample size: an application to backtesting counterparty credit risk internal models
This paper presents a theoretical and empirical evaluation of the Anderson–Darling test when the sample size is limited.
International Financial Reporting Standard 9 expected credit loss estimation: advanced models for estimating portfolio loss and weighting scenario losses
In this paper, the authors propose a model to estimate the expected portfolio losses brought about by recession risk and a quantitative approach to determine the scenario weights.
The 2D tree–grid method
In this paper, the authors introduce a novel, explicit, wide-stencil, two-dimensional (2D) tree–grid method for solving stochastic control problems (SCPs) with two space dimensions and one time dimension, or, equivalently, the corresponding Hamilton…
Risk data validation under BCBS 239
Based on a survey of twenty-nine major financial institutions, this paper aims to advise banks and other financial services firms on what is needed to get ready for and become compliant with BCBS 239, especially in the area of risk data validation.
Parameter estimation, bias correction and uncertainty quantification in the Vasicek credit portfolio model
This paper is devoted to the parameterization of correlations in the Vasicek credit portfolio model. First, the authors analytically approximate standard errors for value-at-risk and expected shortfall based on the standard errors of intra-cohort…
Factor investing: get your exposures right!
This paper is devoted to the question of optimal portfolio construction for equity factor investing. The authors discuss the question of multifactor portfolio construction and show that the simplistic approaches often used by practitioners tend to be…
Optimal posting of collateral with recurrent neural networks
Pierre Henry-Labordère applies neural networks to a control problem approach for managing collateral
Estimating maturity profiles of nonmaturing deposits
This paper proposes a method to extract deposit lifetime data from individual account transactions.
Funding and credit risk with locally elliptical portfolio processes: an application to central counterparties
In this paper, the authors extend the scaling approach of Andersen et al (2017a) from a model driven by Brownian motion to one driven by an arbitrary isotropic Lévy process.
An efficient portfolio loss model
This paper develops a parsimonious model for evaluating portfolio credit derivatives dependent on aggregate loss.
Recursive estimation of the exponentially weighted moving average model
The aim of this paper is twofold: (i) to introduce two recursive estimation algorithms suitable for the EWMA process that are applicable for routine volatility predictions, and (ii) to investigate their prediction ability by comparing them with other…
Rating migrations of US financial institutions: are different outcomes equivalent?
This study employs a competing risks approach to examine the rating migrations of US financial institutions (FIs) during the period 1984–2006.
Proof-of-work blockchains and settlement finality: a functional interpretation
In this paper, the authors aim to provide an interpretation of the legal issue of settlement finality in the context of proof-of-work distributed ledger technology, such as the Bitcoin network.