Technical paper
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.
The present of futures
Fabio Mercurio introduces a new multi-curve model for pricing futures convexity adjustments
Navigating the new energy market dynamics
Utilities need to adapt to compete in the “new normal” environment of renewable energy supply
Shapley allocation, diversification and services in operational risk
In this paper, the authors propose a method of allocating operational risk regulatory capital using a closed-form Shapley method, applicable to a large number of business units (BUs).
Modeling catastrophic operational risk using a compound Neyman–Scott clustering model
In this paper, the authors discuss the hazard generated by OpRisk driven by natural and human-made disasters, and argue the position of the LDA as the most-fitted statistical approach to deal with it.
The absence of evidence and the evidence of absence: an algorithmic approach for identifying operational outages in TARGET2
This paper implements an algorithmic approach to identify participants’operational outages based on transaction data.
Distributed ledger technology in payments, clearing and settlement
This paper examines how DLT can be used in the area of PCS, and identifies both the opportunities and challenges associated with its long-term implementation and adoption.
Risk mutualization and financial stability: recovering and resolving a central counterparty
This paper investigates how financial market participants respond to risk mutualization implemented by a CCP using assessments after a large credit loss.
SPEI’s diary: econometric analysis of a dynamic network
This paper identifies the determinants behind the dynamics of the real-time settlement payment system in Mexico, SPEI, during the period January 2005–December 2015.
FMIC 2 special issue introduction: a policy view on developments in the field of financial market infrastructures
This introductory article positions these papers and speeches within the context of the wider conference proceedings of the Financial Market Infrastructure Conference II: New Thinking in a New Era, including insights from the panel sessions and…