Risk Management
We provide a data-driven algorithm to classify market regimes for time series. We utilise the path signature, encoding time series into easy-to-describe objects, and provide a metric structure which establishes a connection between…
Introducing common shocks is a popular dependence modelling approach, with some recent applications in loss reserving. The main advantage of this approach is the ability to capture structural dependence coming from known relationships. In…
This paper considers Importance Sampling (IS) for the estimation of tail risks of a loss defined in terms of a sophisticated object such as a machine learning feature map or a mixed integer linear optimisation formulation. Assuming only…
We present a novel methodology to quantify the "impact" of and "response" to market shocks. We apply shocks to a group of stocks in a part of the market, and we quantify the effects in terms of average losses on another part of the market…
We study neural networks as nonparametric estimation tools for the hedging of options. To this end, we design a network, named HedgeNet, that directly outputs a hedging strategy. This network is trained to minimise the hedging error instead…
Statistical inference of the dependence between objects often relies on covariance matrices. Unless the number of features (e.g. data points) is much larger than the number of objects, covariance matrix cleaning is necessary to reduce…
Aggregation sets, which represent model uncertainty due to unknown dependence, are an important object in the study of robust risk aggregation. In this paper, we investigate ordering relations between two aggregation sets for which the sets…
We introduce a neural network approach for assessing the risk of a portfolio of assets and liabilities over a given time period. This requires a conditional valuation of the portfolio given the state of the world at a later time, a problem…
This paper evaluates and assesses the risk associated with capital allocation in cryptocurrencies (CCs). In this regard, we take a basket of 27 CCs and the CC index EWCI$^-$ into account. After considering a series of statistical tests we…
This article is part of a comprehensive research project on liquidity risk in asset management, which can be divided into three dimensions. The first dimension covers liability liquidity risk (or funding liquidity) modeling, the second…
We study the ex-ante minimization of market inefficiency, defined in terms of minimum deviation of market prices from fundamental values, from a centralized planner's perspective. Prices are pressured from exogenous trading actions of…
Crime can have a volatile impact on investments. Despite the potential importance of crime rates in investments, there are no indices dedicated to evaluating the financial impact of crime in the United States. As such, this paper presents…
We introduce a new measure of performance of investment strategies, the monotone Sharpe ratio. We study its properties, establish a connection with coherent risk measures, and obtain an efficient representation for using in applications.
The central idea of the paper is to present a general simple patchwork construction principle for multivariate copulas that create unfavourable VaR (i.e. Value at Risk) scenarios while maintaining given marginal distributions. This is of…
Identifying risk spillovers in financial markets is of great importance for assessing systemic risk and portfolio management. Granger causality in tail (or in risk) tests whether past extreme events of a time series help predicting future…
The multivariate conditional probability distribution models the effects of a set of variables onto the statistical properties of another set of variables. In the study of systemic risk in a financial system, the multivariate conditional…
Employing a generalized definition of Pratt (1964) and Arrow's (1965, 1971) probability premium, we introduce a new concept of attitude towards probability. We illustrate in a problem of risk sharing that whether attitude towards…
This work is entirely devoted to compare the largest claims from two heterogeneous portfolios. It is assumed that the claim amounts in an insurance portfolio are nonnegative absolutely continuous random variables and belong to a general…
Rapid development of advanced modelling techniques gives an opportunity to develop tools that are more and more accurate. However as usually, everything comes with a price and in this case, the price to pay is to loose interpretability of a…
Collateralized debt obligation (CDO) has been one of the most commonly used structured financial products and is intensively studied in quantitative finance. By setting the asset pool into different tranches, it effectively works out and…