Technical paper/Risk management
Credit default prediction using a support vector machine and a probabilistic neural network
In this study, the authors address the fact that the ranking of classifiers varies for different criteria with measures under different circumstances, by proposing the simultaneous application of support vector machine and probabilistic neural network …
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.
The quickest way to lose the money you cannot afford to lose: reverse stress testing with maximum entropy
This paper extends a technique devised by Saroka and Rebonato to “optimally” deform a yield curve in order to deal with a common and practically relevant class of optimization problems subject to linear constraints.
Optimal equity protection of Solvency II regulated portfolios
In the context of equity investments, this paper examines the relationship between the cost of acquiring protection (in the form of put option) and the reduction of capital charges that it entails. The paper develops the idea that Solvency II regulations…
Evaluating the role of risk networks in risk identification, classification and emergence
This paper presents an evaluation of how risk interdependence affects the risk management process.
Risk management and regulation
The author presents a systematic review of the chronological evolution of risk management, in tandem with financial innovation and methodological advances in derivatives pricing.
Nondefault loss allocation at central counterparties
In this paper, the authors answer three questions about the appropriate allocation of nondefault losses at central counterparties.
Estimating “hedge and auction” liquidation costs in central counterparties: a closeout risk approach
This paper shows how the closeout risk framework can be extended to realistically represent and simulate the potential outcomes of “hedge and auction” default management policies currently implemented by several major central counterparties.
Management of behavioral risk in the first line of defence
This paper discusses key features of fighting behavioral risk in the business line of operations as the central hub for all transactions in a bank.
An uncertainty quantification framework for the achievability of backtesting results of trading strategies
In this paper, the authors propose a framework for implementing and backtesting trading strategies.
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.
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.
Trading lightly: cross-impact and optimal portfolio execution
A liquidity model for basket of correlated securities is presented
Various approximations of the total aggregate loss quantile function with application to operational risk
This paper investigates the mechanics of the empirical aggregate loss bootstrap distribution.
A gradient-boosting decision-tree approach for firm failure prediction: an empirical model evaluation of Chinese listed companies
In this paper, the authors employ a gradient-boosting decision-tree method to improve firm failure prediction and explain how to better analyze the relative importance of each financial variable.
Optimal execution of accelerated share repurchase contracts with fixed notional
This paper studies the pricing and optimal execution strategy of an accelerated share repurchase contract with a fixed notional.
Forecasting scenarios from the perspective of a reverse stress test using second-order cone programming
This paper proposes a model for forecasting scenarios from the perspective of a reverse stress test using interest rate, equity and foreign exchange data.
Does higher-frequency data always help to predict longer-horizon volatility?
This paper shows that realized conditional autocorrelation in return residuals is a strong predictor of the relative performance of different frequency models of volatility.
Managing energy market volumetric risk
Krzysztof Wolyniec presents a volumetric risk management model for energy markets
P&L attribution for energy portfolios with non-linear exposures
Carlos Blanco and Alessandro Mauro explain how non-linear P&L attribution tools can improve a company’s business intelligence capabilities
Operational risk and the three lines of defence in UK financial institutions: is three really the magic number?
This paper examines the three lines of defence in the context of ORM in UK financial institutions.
Analytical method of computing stressed value-at-risk with conditional value-at-risk
The author of this paper develops an analytical form of stressed value-at-risk (analytical SVaR), using conditional value-at-risk (CoVaR).
How risk managers should fix tracking error volatility and value-at-risk constraints in asset management
In this paper, the author determines an optimal value for a set of limits composed of the lower limit on TEV, the upper limit on TEV and the upper limit on VaR.
Adjusting VAR to correct sample volatility bias
David Frank proposes an adjustment to sample variance for the computation of value-at-risk