Technical paper
Shortfall deviation risk: an alternative for risk measurement
In this paper, the authors propose the SDR risk measure to consider the degree of dispersion of an extreme loss in addition to its expected value.
The death of one thousand flowers or the AMA reborn?
The author of this paper explores the reasons for the pending demise of the advanced measurement approach (AMA) to operational risk.
Operational risk models and asymptotic normality of maximum likelihood estimation
In this paper, the author studies how asymptotic normality does, or does not, hold for common severity distributions in operational risk models.
Risk reduction in a time series momentum trading strategy
In this paper, the authors investigate the four most commonly used risk measures – return volatility, beta, value-at-risk and stressed value-at-risk – of a TSM trading strategy.
On the role of structural breaks in identifying the dynamic conditional linkages between stock and commodity markets
In this paper, the authors explore the time-varying linkages between two strategic commodities covering the energy sector (crude oil and natural gas) and the QE Al Rayan Islamic Index over the period March 15, 2011–December 25, 2014.
Modeling Alberta power prices through fundamentals
The authors of this paper model medium- and long-term Alberta power prices by identifying the primary price drivers and characterizing their dynamics in an engineering-based bottom-up model.
Scaling by the square-root-of-time rule: an empirical investigation using five market indexes
This paper analyzes five composite stock indexes to determine the different behaviors of scaling across markets.
Calibration of local correlation models to basket smiles
The authors build a whole family of local correlation models by combining the particle method with a new, simple idea.
Insights into robust optimization: decomposing into mean–variance and risk-based portfolios
The authors of this paper aim to demystify portfolios selected by robust optimization by looking at limiting portfolios in the cases of both large and small uncertainty in mean returns.
A prudent loss given default estimation for mortgages
The author of this paper proposes a prudent methodology to correct for potential biases in LGD estimations due to historical price appreciations, appraisal biases and wear-and-tear or potential damage to the house.
Optimal B-robust posterior distributions for operational risk
The aim of this paper is to integrate prior information into a robust parameter estimation via OBR-estimating functions.
Zonal merit-order effects of wind generation development on day-ahead and real-time electricity market prices in Texas
This paper uses a regression-based approach to explore the impact of wind generation development on wholesale electricity prices in the ERCOT market.
A quick tool to forecast value-at-risk using implied and realized volatilities
The authors propose a naive model to forecast ex ante value-at-risk (VaR), using a shrinkage estimator between realized volatility estimated on past return time series as well as implied volatility quoted in the market.
Delta-hedged gains and risk-neutral moments
The authors investigate the underperformance of delta-hedged option portfolios in relation to ex ante moments of the stock market’s return distribution.
Equal risk allocation with carry, value and momentum
The authors of this paper analyze an equal-weight portfolio of global cross-asset-class risk factor exposures.
A map of collateral uses and flows
This paper provides insights into the increased demand for collateral, the reduced capacity for banks to act as collateral intermediaries and examples of risks and vulnerabilities in collateral flows.
Consensus information and consensus rating: a simulation study on rating aggregation
This paper explores the aggregation of different single ratings to a ‘consensus rating’ to get a higher precision of a debtor’s default probability. It builds upon the methodology published by Grün et al, 2013 and Lehmann and Tillich, 2016.
The benefit of using random matrix theory to fit high-dimensional t-copulas
This paper uses simulation studies and an example of operational risk modeling to show the necessity and benefit of using RMT to fit high-dimensional t-copulas in risk modeling.
‘Hot-start’ initialisation of the Heston model
Serguei Mechkov initialises Heston model’s parameters using probability distributions
Gap risk KVA and repo pricing
Wujiang Lou introduces a reserve capital approach to the hedging error in the BSM model
Benchmarking the loss given default parameter for mortgage loan portfolios under stress
The authors analyze the impact of a decline in property prices that leads to stressed recovery rates for collateral on the loss given default (LGD) parameter in portfolios of mortgage loan.
Commodity volatility, skew and inverse leverage effect
Krzysztof Wolyniec on leverage effects and volatility in commodity markets
Adjusting VAR to correct sample volatility bias
David Frank proposes an adjustment to sample variance for the computation of value-at-risk
The Nordic futures market for power: finally mature and efficient?
The authors of this paper study the forecasting performance of Nordic power futures in order to see whether the futures bias reported in a number of previous studies still prevails and, if so, whether this means that the market is inefficient.