Technical paper
Better anti-procyclicality? From a critical assessment of anti-procyclicality tools to regulatory recommendations
The authors carry out quantitative and qualitative analysis of anti-procyclicality tools and suggest policy measures intended to make APC tools more effective.
Joint S&P 500/VIX smile calibration in discrete and continuous time
An arbitrage-free model for exotic options that captures smiles and futures is presented
Multi-factor default correlation model estimation: enhancement with bootstrapping
The authors propose using a three-factor Merton model to allow more accurate quantification when investigating the credit risk of portfolios.
Are cryptocurrencies cryptic or a source of arbitrage? A genetic algorithm approach
The authors identify triangular arbitrage trading opportunities through genetic algorithms in order to find insights into the volatility of cryptocurrencies and stablecoins with the largest market cap.
The carbon equivalence principle: minimising the cost to carbon net zero
A method to align incentives with sustainability in financial markets is introduced
Gas market area mergers: when is bigger better?
The authors investigate welfare effects of gas market area mergers and argue that merged market areas benefit from increased market power.
The impact of the Fundamental Review of the Trading Book: evaluation on a stylized portfolio
The authors investigate banks' market risk capital requirements under the internal models approach through the lens of the Basel Fundamental Review of the Trading Book, using data from the period 2007-19.
On the recovery tools of a central counterparty
The author argues that assessments should be preferred over variation margin gains haircutting when CCP resilience is tested by cases of default loss being greater than prefunded financial resources.
The trade-off between shorter settlement times and multilateral netting benefits in deferred net settlement
This paper investigates settlement windows in multilateral netting in the US equity markets, finding that there is no material loss of multilateral netting benefits for windows over an hour.
On the contagion effect between crude oil and agricultural commodity markets: a dynamic conditional correlation and spectral analysis
The authors present an empirical study concerning the volatility comovements between crude oil and agricultural commodities relative to global economic shocks such as Covid-19 and the Russo-Ukrainian war.
The cost of mis-specifying price impact
Expected returns can be significantly affected by the wrong use of impact models
Evaluating credit valuation adjustment with wrong-way risk for Bermudan options
The authors propose a method for credit valuation adjustment evaluation that avoids the need for simulation while maintaining efficiency and accuracy.
Shapley values as an interpretability technique in credit scoring
The authors analyze the usefulness of the Shapley value as a machine learning interpretability technique in credit scoring.
Optimal damping with a hierarchical adaptive quadrature for efficient Fourier pricing of multi-asset options in Lévy models
The authors put forward a method for pricing European multi-asset options intended to address challenges related to the choice of damping parameters and the treatment of high dimensionality when designing methods for Fourier pricing options.
Online attention and directors’ and officers’ liability insurance: evidence from Chinese listed firms
The authors investigate how online attention impacts the purchases of D&O liability insurance.
Extremiles, quantiles and expectiles in the tails
The author investigates quantiles, expectiles and extremiles in tail estimators for linear regression.
Assessing the potential for asset diversification: an analysis of Brazilian stock indexes, Bitcoin, gold, crude oil and exchange rates
The authors investigate the Islamic and conventional stock indexes for Bitcoin, crude oil and gold in Brazil.
Forecasting the default risk of Chinese listed companies using a gradient-boosted decision tree based on the undersampling technique
The authors put forward a model for default prediction designed to minimise the impact of imbalanced classification, verifying its effectiveness with real world data from Chinese listed companies.
Conditional and unconditional intraday value-at-risk models: an application to high-frequency tick-by-tick exchange-traded fund data
The authors consider conditional and unconditional intraday value-at-risk models for high-frequency exchange-traded funds, providing results useful to practitioners of high-frequency trading.
Assessing the potential profitability of automated power market trading using event signals sourced from grid frequency data
The authors put forward a profitable trading strategy based on power grid events, demonstrating that minimized reaction times can increase profits.
Credit contagion risk in German auto loans
The authors employ a data set of over 5 million German auto loans to investigate credit contagion risk and show that defaults cannot be attributed to single factors.
Tail sensitivity of stocks to carbon risk: a sectoral analysis
The authors investigate the tail sensitivity of US industry returns in relation to changes of carbon-driven climate risk, finding that tail sensitivities rise with the greenhouse has emissions of an industry.
Neural variance reduction for stochastic differential equations
This paper proposes the use of neural stochastic differential equations as a means to learn approximately optimal control variates, reducing variance as trajectories of the SDEs are simulated.