Risk Management
The stability of income payments in a pooled annuity fund is studied. In those funds, members receive a fluctuating income depending on their experienced mortality in exchange for their pension savings. The focus is on describing the…
Prediction of events in financial markets is every investor's dream and, usually, wishful thinking. From a more general, economic and societal viewpoint, the identification of indicators for large events is highly desirable to assess…
In this paper, we first introduce a simulator of cases estimates of incurred losses, called `SPLICE` (Synthetic Paid Loss and Incurred Cost Experience). In three modules, case estimates are simulated in continuous time, and a record is…
The modeling of the probability of joint default or total number of defaults among the firms is one of the crucial problems to mitigate the credit risk since the default correlations significantly affect the portfolio loss distribution and…
This paper investigates a Pareto optimal insurance problem, where the insured maximizes her rank-dependent utility preference and the insurer is risk neutral and employs the mean-variance premium principle. To eliminate potential moral…
Estimating value-at-risk on time series data with possibly heteroscedastic dynamics is a highly challenging task. Typically, we face a small data problem in combination with a high degree of non-linearity, causing difficulties for both…
We propose the Star-Shaped deviation measures in the same vein as Star-Shaped risk measures and Star-Shaped acceptability indexes. We characterize Star-Shaped deviation measures through Star-Shaped acceptance sets and as the minimum of a…
This paper examines the determinants of the volatility of futures prices and basis for three commodities: gold, oil and bitcoin -- often dubbed solid, liquid and digital gold -- by using contract-by-contract analysis which has been…
This paper introduces a formulation of the optimal network compression problem for financial systems. This general formulation is presented for different levels of network compression or rerouting allowed from the initial interbank network.…
In this paper, we model the rating process of an entity as a piecewise homogeneous continuous time Markov chain. We focus specifically on calibrating the model to both historical data (rating transition matrices) and market data (CDS…
Extreme weather events can have severe impacts on national economies, leading the recovery of low- to middle-income countries to become reliant on foreign financial aid. Foreign aid, however, is slow and uncertain. Therefore, the Sendai…
This paper investigates the use of retrospective approximation solution paradigm in solving risk-averse optimization problems effectively via importance sampling (IS). While IS serves as a prominent means for tackling the large sample…
This paper empirically analyzes a dataset published by the European Banking Authority. Our main aim was to study how the Leverage Ratio is affected by adverse financial scenarios. This was be followed by observing how Leverage Ratio…
The goal of our 4-phase research project was to test if a machine-learning-based loan screening application (5D) could detect bad loans subject to the following constraints: a) utilize a minimal-optimal number of features unrelated to the…
Environmental, Social, and Governance (ESG) scores measure companies' performance concerning sustainability and societal impact and are organized on three pillars: Environmental (E), Social (S), and Governance (G). These complementary…
In this paper, we introduce a novel methodology to model rating transitions with a stochastic process. To introduce stochastic processes, whose values are valid rating matrices, we noticed the geometric properties of stochastic matrices and…
We consider the problem where a modeller conducts sensitivity analysis of a model consisting of random input factors, a corresponding random output of interest, and a baseline probability measure. The modeller seeks to understand how the…
Driven by the good results obtained in computer vision, deep generative methods for time series have been the subject of particular attention in recent years, particularly from the financial industry. In this article, we focus on commodity…
Although there is a growing consensus that a low-carbon transition will be necessary to mitigate the accelerated climate change, the magnitude of transition-risk for investors is difficult to measure exactly. Investors are therefore…
This paper presents a new method to assess default risk based on applying the CEV process to the KMV model. We find that the volatility of the firm asset value may not be a constant, so we assume the firm's asset value dynamics are given by…