Technical paper
Cleaning correlation matrices
Bun, Bouchaud and Potters present a technique that allow cleaning in-sample noise from correlation matrixes
How to get maximum value from power plant hedging
Dynamic hedging is becoming more common among plant operators
Liability-side pricing of swaps
Wujiang Lou presents a framework to compute recursive CVA and FVA via Monte Carlo simulation
Bank fraud and the macroeconomy
This paper empirically tests for correlations between fraud and the macroeconomy.
A maximum entropy approach to the loss data aggregation problem
This paper examines and compares alternative ways of solving the problem of determining the density of aggregate losses.
A simulation comparison of quantile approximation techniques for compound distributions popular in operational risk
The objective of this paper is to compare numerical approximation techniques in terms of their practical usefulness and potential applicability in an operational risk context.
Evaluating operational risk by an inhomogeneous counting process based on Panjer recursion
This paper proposes a new approach for determining OpVaR using an inhomogeneous counting process based on Panjer recursion as the frequency distribution.
Cross-dependent volatility
Julien Guyon introduces cross-dependent volatility models and calibrate them to market smiles
Central counterparties and banks: vive la difference
This paper highlight the key differences between CCPs and banks in terms of roles, risk profiles, balance sheets and systemic characteristics, and the implications of these differences for CCP risk management and regulation.
Dynamic credit score modeling with short-term and long-term memories: the case of Freddie Mac’s database
This paper investigates the two mechanisms of memory, short-term memory and long-term memory, in the context of credit risk assessment.
“Incomplete demutualization” and financial market infrastructure: central counterparty ownership and governance after the crisis of 2008–9
This paper examines risk management governance challenges of the demutualized CCP ownership model and the incentives faced by “incomplete demutualization”, where clearing members remain the ultimate underwriters of CCP default risk.
Value-at-risk time scaling: a Monte Carlo approach
This paper discusses a VaR time-scaling approach based on fitting a distribution function so as to apply a Monte Carlo simulation to determine long-term VaR.
Skin in the game: central counterparty risk controls and incentives
The authors discuss the incentives created by the structure of CCPs’ default waterfalls, drawing out the role of transparency and governance in ensuring effective incentives.
A framework for market, credit and transfer risk aggregation and stress testing
The authors develop a framework that consistently and fully integrates the market, credit and country transfer risks of a general portfolio of financial assets in a multi-period setup.
Market pricing of credit linked notes: the influence of the financial crisis
This paper analyzes whether the financial crisis of 2007–9 had an effect on the mispricing of CLNs.
Contingent credit default swaps: accurate and approximate pricing
This paper analyzes the pricing of contingent credit default swaps.
A credit portfolio framework under dependent risk parameters: probability of default, loss given default and exposure at default
This paper introduces a credit portfolio framework that allows for dependencies between default probabilities, secured and unsecured recovery rates and exposures at default (EADs).
An application of sensitivity analysis to hedge funds
This paper investigates a sample of 142 live hedge funds via a DEA sensitivity analysis using a super-efficiency model.
Central counterparties need thicker skins
The paper makes an important contribution to this ongoing dialogue by proposing a set of principles and an analytical framework for calibrating skin-in-the-game contributions.
Wiener chaos expansion and numerical solutions of the Heath–Jarrow–Morton interest rate model
The authors propose an efficient, novel numerical scheme for solving the stochastic Heath–Jarrow–Morton interest rate model.
Performance versus turnover: a story by 4000 alphas
This paper analyzes empirical data for 4000 real-life trading portfolios with holding periods of about 0.7-19 trading days.
Pricing crude oil options using Lévy processes
This paper employs the fractional fast Fourier transform to calibrate parameters in an optimization setup.
Ex post payoffs of a tolling agreement for natural gas-fired generation in Texas
This paper explores the problem of insufficient investment incentives for natural gas-fired generation in the ERCOT.
A method of forecasting wholesale electricity market prices
This paper employs the least-action principle to model the complex relationship between expected load and expected price in electricity spot markets.