Technical paper
Efficient valuation of equity-indexed annuities under Lévy processes using Fourier cosine series
This paper proposes an efficient algorithm to value two popular crediting formulas found in equity-indexed annuities – APP and MPP – under general Lévy-process-based index returns.
Forward ordinal probability models for point-in-time probability of default term structure: methodologies and implementations for IFRS 9 expected credit loss estimation and CCAR stress testing
This paper proposes an ordinal model based on forward ordinal probabilities for rank outcomes.
Local variance gamma revisited
In this paper, the authors propose a new method of constructing volatility surfaces for foreign exchange options.
The issues with the standardized measurement approach and a potential future direction for operational risk capital modeling
This paper discusses the criticism and praise the SMA and AMA have received, respectively, in many recent articles.
A new nonlinear partial differential equation in finance and a method of its solution
In this paper, the author considers a special type of nonlinear PDE that arises by applying optimization to some financial problems.
A practical maturity assessment method for model risk management in banks
This paper proposes a qualitative method to assess the maturity of model risk management practices within banks.
A nonparametric local volatility model for swaptions smile
This paper proposes a nonparametric local volatility Cheyette model and applies it to pricing interest rate swaptions.
A vine copula–GARCH approach to corporate exposure management
This paper applies vine copulas with GARCH marginals to the problem of capturing asset dependence and tail dynamics for currency and commodity exposures commonly found in portfolios of global corporates.
An operational risk-based regime-switching model for stock prices
This paper proposes a new risk-based regime-switching model for stock prices to examine the impact of operational risk events on stock prices.
Local volatility models in commodity markets and online calibration
This paper introduces a local volatility model for the valuation of options on commodity futures by using European vanilla option prices.
Using derivatives to forecast oil scenarios
Generating probability-weighted oil price scenarios from traded derivatives prices can help risk managers in the industry
Asset price bubbles and the quantification of credit risk capital with sensitivity analysis, empirical implementation and an application to stress testing
This paper presents an analysis of the impact of asset price bubbles on standard credit risk measures.
Estimating the tail shape parameter from option prices
In this paper, the author proposes a method to estimate the tail shape parameter of the risk-neutral density.
Inefficiency and bias of modified value-at-risk and expected shortfall
This paper compares mVaR and mES estimators with VaR and ES under normal and fat tailed t-distributions.
Comparing multivariate volatility forecasts by direct and indirect approaches
This paper investigates direct and indirect volatility evaluations in the multivariate framework by means of a Monte Carlo simulation
Risk management for private equity funds
This paper aims to fill a gap in the literature by developing the first comprehensive risk management framework for private equity fund investments.
Extremely (un)likely: a plausibility approach to stress testing
CCP’s risk managers propose a framework for generating extreme but plausible stress scenarios
Local-stochastic volatility: models and non-models
Lorenzo Bergomi exposes a condition important to the use of LSV models in trading
A balanced approach to central counterparty margining
This paper is meant to serve as a comparison of the approaches and margin models employed by CCPs.
Managing market liquidity risk in central counterparties
This paper discusses the different approaches to incorporating market liquidity risk within a CCP’s default waterfall and the challenges that these approaches pose.
Initial margin model sensitivity analysis and volatility estimation
This paper presents a new approach to parameter selection based on the statistical properties of the worst loss over a margin period of risk estimated by the margin model under scrutiny.
Performance testing of margin models using time series similarity
This paper proposes a performance test based on empirical similarity that would account for margin shortfall, procyclicality and efficiency in a single score.
Initial margin estimations for credit default swap portfolios
This paper presents a clearinghouse framework to establish initial margin requirements for portfolios of credit default swap instruments.
Cleared margin setting at selected central counterparties
In this paper, the authors address one aspect of CCP risk management: initial margining practices. The paper provides a historical review of margining at selected CCPs as well as an overview of their current margin policies.