Technical paper
Genetic algorithm-based portfolio optimization with higher moments in global stock markets
This paper investigates the distributional characteristics of stock market returns and analyzes the significance of higher moments.
Monitoring transmission of systemic risk: application of partial least squares structural equation modeling in financial stress testing
This paper illustrates how the transmission of systemic risk from shadow banking to the regulated banking sector can be modeled using partial least squares structural equation modeling in an effort to help regulators better monitor and manage contagion.
Debt, information asymmetry and bankers on board
This paper contributes to the financial networks literature by providing evidence that well-connected bankers on the boards of directors of nonfinancial firms reduce information asymmetry between credit markets and firms.
News-sentiment networks as a company risk indicator
This paper defines an algorithm for measuring sentiment-based network risk, to understand the relationship between news sentiment and company stock price movements, and to better understand connectivity among companies.
Risk-averse dynamic arbitrage in illiquid markets
This paper introduces the concept of risk-averse dynamic arbitrage using a general time-consistent dynamic risk measure and a risk-aversion threshold level.
Reflections on recent volatility
This paper deals with the unprecedented equity volatility in the second week of February 2018. The paper recaps the week, places the market movement in a historical context, discusses how some traders and funds were affected and offers a few guesses as…
The Kelly criterion in portfolio optimization: a decoupled problem
This paper examines how the Kelly criterion can be implemented into a portfolio optimization model that combines risk and return into a single objective function using a risk parameter.
Identifying patterns in the bank–sector credit network of Spain
In this paper, the authors study the topological and structural properties of the bank–sector credit network of Spain over the period 1997–2007.
Risk transformation of a zero-subsidy wind portfolio
Joaquin Narro analyses the hedging of a hypothetical zero-subsidy wind portfolio with base load products in the futures markets
Rogue traders versus value-at-risk and expected shortfall
VAR and ES are ineffective to deter rogue trading
International and temporal diversifications: the best of both worlds?
In this paper, the authors focus on seven stock market indexes: two US, three European, one emerging and one Japanese. They select different pairs of markets and, with the help of wavelets, decompose these series at different timescales.
Underperforming performance measures? A review of measures for loss given default models
This paper reviews the ways of measuring the performance of LGD models that have been previously used in the literature and also suggests some new measures.
A central limit theorem formulation for empirical bootstrap value-at-risk
In this paper, the importance of the empirical bootstrap (EB) in assessing minimal operational risk capital is discussed, and an alternative way of estimating minimal operational risk capital using a central limit theorem (CLT) formulation is presented.
Bridging networks, systems and controls frameworks for cybersecurity curriculums and standards development
This paper proposes a risk management framework designed to facilitate the alignment, integration and streamlining of professional practice standards and computer science/cybersecurity educational curriculums by bridging NPNATFs, SNIFs and RMCPFs.
Tail dependence in small samples: from theory to practice
In this paper, the authors study tail dependence by defining the conditions required for all the methods used to perform and to quantify their efficiency and accuracy.
Model risk in the Fundamental Review of the Trading Book: the case of the Default Risk Charge
This paper assesses the model risk associated with the copula choice for the calculation of the Default Risk Charge (DRC) measure.
Statistics of VIX futures and their applications to trading volatility exchange-traded products
In this paper, the authors study the dynamics of Chicago Board Options Exchange volatility index (VIX) futures and exchange-traded notes (ETNs)/exchange-traded funds (ETFs).
The validation of filtered historical value-at-risk models
In this paper, the authors examine the problem of validating and calibrating FHS VaR models, focussing in particular on the Hull and White (1998) approach with EWMA volatility estimates, given its extended use in the industry.
The Nordic/Baltic spot electric power system price: univariate nonlinear impulse-response analysis
This paper studies the characteristics of the conditional mean and volatility of daily price movements of the system price for the Nordic/Baltic one-day-ahead spot electric power market.
Takeover likelihood in the oil and gas industry: firm-, macro- or industry-specific causes?
In this study, the authors investigate drivers of merger activity in the oil and gas sector and seek to ascertain how key determinants influence the takeover likelihood of oil and gas companies.
Moment estimators for autocorrelated time series and their application to default correlations
In this paper, the authors analyze how autocorrelation affects MoM estimators commonly used in the industry to determine the latent asset return correlation, and propose a new estimator that includes correction terms to account for the autocorrelation…
Validation of profit and loss attribution models for equity derivatives
The aim of this paper is to validate profit and loss attribution generated by daily movements of option prices as seen through their Black–Scholes (Black and Scholes 1973) and Merton (1973) implied volatilities.
A risk-based approach to construct multi asset portfolio solutions
In this paper, the authors introduce an approach to cluster asset classes by correlation distance and then outline how these results can be used to design portfolios that are optimal in a group risk parity (GRP) framework.