Merton models
Optimal trade execution with unknown drift
This paper demonstrates a means through which to adapt results for optimal trading strategies under different conditions when the drift of the asset is unknown.
Was Archegos default a one-in-a-million event?
BoE quant says neglecting high leverage and WWR may create conditions for similar blow-ups
KVA as a transfer of wealth
A capital valuation adjustment designed to preserve a firm’s value to shareholders is introduced
Costs of capital under credit risk
In cost-of-capital computations, credit risk is only taken into consideration at the level of the debt beta approach. We show that applications of the debt beta approach in company valuation suffer from unrealistic assumptions about the market index and…
The optimal investment problem in stochastic and local volatility models
This paper considers the classical optimal investment allocation problem of Merton through the lens of some more modern approaches, such as the stochastic volatility and local volatility models.
Podcast: Richard Martin on EM debt, copulas, machine learning
Quant sceptical of machine learning algos and black boxes
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).
Credit risk: taking fluctuating asset correlations into account
This paper puts forward an ensemble approach for asset correlations.
Don't blame the quants, says Merton
Quantitative models were unfairly criticised in the aftermath of the financial crisis, says legendary quant and co-creator of the Black-Scholes equation, but there’s plenty for quants to work on in the current environment
Profile: NYU’s Robert Engle on volatility, liquidity and systemic risk
An Arch economist
Marking systemic portfolio risk with the Merton model
Marking systemic portfolio risk with the Merton model
Capturing credit correlation between counterparty and underlying
Capturing credit correlation between counterparty and underlying
Lifetime achievement award: John Hull
Risk awards 2011
Smiling jumps
Smiling jumps
Quant Congress USA: UK and Netherlands least risky European debt
Relatively healthy private sector means UK and Netherlands least likely to default
Variance-covariance-based risk allocation in credit portfolios
Mikhail Voropaev proposes high-precision analytical approximation for variance-covariance-based risk allocation in a portfolio of risky assets. A general case of a single-period multi-factor Merton-type model with stochastic recovery is considered. The…