Risk Management
One of the key elements in the banking industry rely on the appropriate selection of customers. In order to manage credit risk, banks dedicate special efforts in order to classify customers according to their risk. The usual decision making…
In this contribution we consider the overall risk given as the sum of random subrisks $\mathbf{X}_j$ in the context of value-at-risk (VaR) based risk calculations. If we assume that the undertaking knows the parametric distribution family…
In this article we consider the parameter risk in the context of internal modelling of the reserve risk under Solvency II. We discuss two opposed perspectives on parameter uncertainty and point out that standard methods of classical…
We compare two models of corporate default by calculating the Jeffreys-Kullback-Leibler divergence between their predicted default probabilities when asset correlations are either high or low. Our main results show that the divergence…
The ongoing concern about systemic risk since the outburst of the global financial crisis has highlighted the need for risk measures at the level of sets of interconnected financial components, such as portfolios, institutions or members of…
In this paper, we study an insurer's reinsurance-investment problem under a mean-variance criterion. We show that excess-loss is the unique equilibrium reinsurance strategy under a spectrally negative L\'{e}vy insurance model when the…
We discuss the systemic risk implied by the interbank exposures reconstructed with the maximum entropy method. The maximum entropy method severely underestimates the risk of interbank contagion by assuming a fully connected network, while…
We reverse engineer dynamics of financial contagion to find the scenario of smallest exogenous shock that, should it occur, would lead to a given final systemic loss. This reverse stress test can be used to identify the potential triggers…
Following the financial crisis of 2007-2008, a deep analogy between the origins of instability in financial systems and complex ecosystems has been pointed out: in both cases, topological features of network structures influence how easily…
Assessing the stability of economic systems is a fundamental research focus in economics, that has become increasingly interdisciplinary in the currently troubled economic situation. In particular, much attention has been devoted to the…
Systemic risk in banking systems remains a crucial issue that it has not been completely understood. In our toy model, banks are exposed to two sources of risks, namely, market risk from their investments in assets external to the banking…
In this research, we introduce a robust metric to identify Systemically Important Financial Institution (SIFI) in a financial network by taking into account both common idiosyncratic shocks and contagion through counterparty exposures. We…
Conditional forecasts of risk measures play an important role in internal risk management of financial institutions as well as in regulatory capital calculations. In order to assess forecasting performance of a risk measurement procedure,…
We applied the Johansen-Ledoit-Sornette (JLS) model to detect possible bubbles and crashes related to the Brexit/Bremain referendum scheduled for 23rd June 2016. Our implementation includes an enhanced model calibration using Genetic…
Worst-case bounds on the expected shortfall risk given only limited information on the distribution of the random variables has been studied extensively in the literature. In this paper, we develop a new worst-case bound on the expected…
Recently, financial industry and regulators have enhanced the debate on the good properties of a risk measure. A fundamental issue is the evaluation of the quality of a risk estimation. On the one hand, a backtesting procedure is desirable…
This paper develops an XVA (costs) analysis of centrally cleared trading, parallel to the one that has been developed in the last years for bilateral transactions. We introduce a dynamic framework that incorporates the sequence of…
A method for calculating multi-portfolio time consistent multivariate risk measures in discrete time is presented. Market models for $d$ assets with transaction costs or illiquidity and possible trading constraints are considered on a…
This paper contains an overview of results for dynamic multivariate risk measures. We provide the main results of four different approaches. We will prove under which assumptions results within these approaches coincide, and how properties…
Equivalent characterizations of multiportfolio time consistency are deduced for closed convex and coherent set-valued risk measures on $L^p(\Omega,\mathcal F, P; R^d)$ with image space in the power set of $L^p(\Omega,\mathcal F_t,P;R^d)$.…