Risk Management
We propose a stochastic model allowing property and casualty insurers with multiple business lines to measure their liabilities for incurred claims risk and calculate associated capital requirements. Our model includes many desirable…
Catastrophic losses caused by natural disasters receive a growing concern about the severe rise in magnitude and frequency. The constructions of insurance and financial management scheme become increasingly necessary to diversify the…
Asset correlations are an intuitive and therefore popular way to incorporate event dependence into event risk, e.g., default risk, modeling. In this paper we study the case of estimation of inter-sector asset correlations by separation of…
Model risk in credit portfolio models is a serious issue for banks but has so far not been tackled comprehensively. We will demonstrate how to deal with uncertainty in all model parameters in an all-embracing, yet easy-to-implement way.
We study pricing and hedging under parameter uncertainty for a class of Markov processes which we call generalized affine processes and which includes the Black-Scholes model as well as the constant elasticity of variance (CEV) model as…
The relationship between set-valued risk measures for processes and vectors on the optional filtration is investigated. The equivalence of risk measures for processes and vectors and the equivalence of their penalty function formulations…
In with-profit life insurance, the prudent valuation of future insurance liabilities leads to systematic surplus that mainly belongs to the policyholders and is redistributed as bonus. For a fair and lawful redistribution of surplus the…
Several well-established benchmark predictors exist for Value-at-Risk (VaR), a major instrument for financial risk management. Hybrid methods combining AR-GARCH filtering with skewed-$t$ residuals and the extreme value theory-based approach…
We aim to assess the impact of a pandemic data point on the calibration of a stochastic multi-population mortality projection model and its resulting projections for future mortality rates. Throughout the paper we put focus on the Li & Lee…
Traditional non-life reserving models largely neglect the vast amount of information collected over the lifetime of a claim. This information includes covariates describing the policy, claim cause as well as the detailed history collected…
In this paper we present results on dynamic multivariate scalar risk measures, which arise in markets with transaction costs and systemic risk. Dual representations of such risk measures are presented. These are then used to obtain the main…
Despite being described as a medium of exchange, cryptocurrencies do not have the typical attributes of a medium of exchange. Consequently, cryptocurrencies are more appropriately described as crypto assets. A common investment attribute…
While environmental, social, and governance (ESG) trading activity has been a distinctive feature of financial markets, the debate if ESG scores can also convey information regarding a company's riskiness remains open. Regulatory…
We discuss how to build ETF risk models. Our approach anchors on i) first building a multilevel (non-)binary classification/taxonomy for ETFs, which is utilized in order to define the risk factors, and ii) then building the risk models…
Fire sales are among the major drivers of market instability in modern financial systems. Due to iterated distressed selling and the associated price impact, initial shocks to some institutions can be amplified dramatically through the…
We design a system for risk-analyzing and pricing portfolios of non-performing consumer credit loans. The rapid development of credit lending business for consumers heightens the need for trading portfolios formed by overdue loans as a…
Modeling and managing portfolio risk is perhaps the most important step to achieve growing and preserving investment performance. Within the modern portfolio construction framework that built on Markowitz's theory, the covariance matrix of…
Zero-Liquidation loans allow DeFi users to borrow USDC against their ETH holdings, but without the risk of being liquidated in case of LTV shortfalls. This is achieved by giving users the option to repay their loans, either in USDC or…
Non-cleared bilateral OTC derivatives between two financial firms or systemically important non-financial entities are subject to regulations that require the posting of initial and variation margin. The ISDA standard approach (SIMM)…
Starting on February 20, 2020, the global stock markets began to suffer the worst decline since the Great Recession in 2008, and the COVID-19 has been widely blamed on the stock market crashes. In this study, we applied the log-periodic…