Technical paper
Local stochastic volatility: shaken, not stirred
Dominique Bang introduces a novel LSV approach to term distribution modelling
The distribution of clearing members’ risk exposure and how it matters
In this paper, the authors compare the data from three major clearing houses concerning tail losses and member concentration.
Portfolio optimization for American options
In this paper, the authors construct strategies for an American option portfolio by exercising options at optimal timings with optimal weights determined concurrently.
The optimal investment problem in stochastic and local volatility models
This paper considers the classical optimal investment allocation problem of Merton through the lens of some more modern approaches, such as the stochastic volatility and local volatility models.
Hedging of options in the presence of jump clustering
This paper analyzes the efficiency of hedging strategies for stock options in the presence of jump clustering.
Bank risk, bank bailouts and sovereign capacity during a financial crisis: a cross-country analysis
This paper analyzes the competitive effects of government bailout expectations on bank risk using a sample of banks in OECD countries from 2005 to 2015.
Is operational risk regulation forward looking and sensitive to current risks?
This paper evaluates the operational risk capital requirements of large US banks to determine whether they are forward looking, sensitive to banks’ current exposures and designed to allow for risk mitigation.
Harmonic distances, centralities and systemic stability in heterogeneous interbank networks
This paper investigates the effects of contagion in interbank-lending networks, with a special focus on the theoretical grounding of centrality measures.
A linguistics approach to solving financial services standardization
In this paper, the author looks at what issues are created through linguistic variation when users of a language or languages attempt to ensure that there is a shared conceptual understanding in the financial domain.
Knocking out corridor variance
Amine Ahallal and Olaf Torne add a knock-out barrier to the standard corridor variance swap
Measuring latent risk preferences: minimizing measurement biases
In this paper, the author uses a unique data set, containing the revealed risk preferences of 9235 subjects, elicited with four different methods, to estimate latent risk preferences.
Dilated convolutional neural networks for time series forecasting
In this paper, the authors present a method for conditional time series forecasting based on an adaptation of the recent deep convolutional WaveNet architecture.
Back to backtesting: integrated backtesting for value-at-risk and expected shortfall in practice
This paper aims to reflect the current state of the discussion on the validation of market risk forecasts by means of backtesting.
Calculating capital charges for sector concentration risk
This paper proposes a methodology to quantify capital charges for concentration risk when economic capital calculations are conducted within a multifactor Merton framework.
Balance-sheet interest rate risk: a weighted Lp approach
In this paper, the authors introduce a new interest rate risk measure that is a product of two factors: one related to the distance between assets and liabilities in the Lp-space of financial instruments, and the other linked to the performance of the…
A three-state early warning system for the European Union
In this paper, the authors develop an early warning system for forecasting a financial crisis of the magnitude of the 2007–8 crisis for the European Union (the EU14).
Predictive fraud analytics: B-tests
In this paper, the authors look at B-tests: methods by which it is possible to identify internal fraud among employees and partners of the bank at an early stage.
A real option analysis on retiring existing coal-fired electricity plants in the United States
This paper looks at the conditions under which a reasonable green policy by a US state encourages the early replacement of existing coal plants with new natural gas plants.
Black was right: price is within a factor 2 of value
CFM’s quants verify Fisher Black’s intuition on mean reversion still applies today
The revised P&L attribution test and the suitability of new proposed thresholds
Montoro, Spinaci and Georgi assess the effectiveness of the FRTB’s P&L attribution test
A general framework for constructing bank risk data sets
This paper proposes a general framework for constructing bank risk data sets, which provides an integrated process from data sources to comprehensive risk data sets.
Value-ranked equity portfolios via entropy pooling
This paper demonstrates how to directly incorporate common value-investing idea into the portfolio optimization process.
Systematic testing of systematic trading strategies
This study reviews the various statistical methodologies that are in place to test multiple systematic trading strategies and implements these methodologies under simulation with known artificial trading rules in order to critically compare and evaluate…
The short-term Danish interbank market before, during and after the financial crisis
This paper studies the microstructure of the short-term uncollateralized Danish interbank market before, during and after the financial crisis, and into an era of negative interest rates.