Related papers: Credit risk - A structural model with jumps and co…
The vast majority of market impact studies assess each product individually, and the interactions between the different order flows are disregarded. This strong approximation may lead to an underestimation of trading costs and possible…
This paper examines the problem of pricing spread options under some models with jumps driven by Compound Poisson Processes and stochastic volatilities in the form of Cox-Ingersoll-Ross(CIR) processes. We derive the characteristic function…
"What are the origins of risks?" and "How material are they?" -- these are the two most fundamental questions of any risk analysis. Quantitative Structuring -- a technology for building financial products -- provides economically meaningful…
This paper takes a deep learning approach to understand consumer credit risk when e-commerce platforms issue unsecured credit to finance customers' purchase. The "NeuCredit" model can capture both serial dependences in multi-dimensional…
We investigate financial market correlations using random matrix theory and principal component analysis. We use random matrix theory to demonstrate that correlation matrices of asset price changes contain structure that is incompatible…
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…
This paper extends the results of the article [C. Kl\"{u}ppelberg and S. M. Pergamenchtchikov. Optimal consumption and investment with bounded downside risk for power utility functions. In Optimality and Risk: {\it Modern Trends in…
In this paper, we propose a methodology based on piece-wise homogeneous Markov chain for credit ratings and a multivariate model of the credit spreads to evaluate the financial risk in European Union (EU). Two main aspects are considered:…
Credit risk management, the practice of mitigating losses by understanding the adequacy of a borrower's capital and loan loss reserves, has long been imperative to any financial institution's long-term sustainability and growth. MassMutual…
As economic entities become increasingly interconnected, a shock in a financial network can provoke significant cascading failures throughout the system. To study the systemic risk of financial systems, we create a bi-partite banking…
In the paper, we use and investigate copulas models to represent multivariate dependence in financial time series. We propose the algorithm of risk measure computation using copula models. Using the optimal mean-$CVaR$ portfolio we compute…
Credit risk default prediction remains a cornerstone of risk management in the financial industry. The task involves estimating the likelihood that a borrower will fail to meet debt obligations, an objective critical for lending decisions,…
The emergence and evolution of real-world systems have been extensively studied in the last few years. However, equally important phenomena are related to the dynamics of systems' collapse, which has been less explored, especially when they…
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 propose an interacting particle system to model the evolution of a system of banks with mutual exposures. In this model, a bank defaults when its normalized asset value hits a lower threshold, and its default causes instantaneous losses…
In this work, we explore the possibility of utilizing transfer learning techniques to address the financial portfolio optimization problem. We introduce a novel concept called "transfer risk", within the optimization framework of transfer…
Correlations between random variables play an important role in applications, e.g.\ in financial analysis. More precisely, accurate estimates of the correlation between financial returns are crucial in portfolio management. In particular,…
We introduce a novel class of credit risk models in which the drift of the survival process of a firm is a linear function of the factors. The prices of defaultable bonds and credit default swaps (CDS) are linear-rational in the factors.…
In this paper, we investigate an optimal investment problem associated with proportional portfolio insurance (PPI) strategies in the presence of jumps in the underlying dynamics. PPI strategies enable investors to mitigate downside risk…
The global financial system can be represented as a large complex network in which banks, hedge funds and other financial institutions are interconnected to each other through visible and invisible financial linkages. Recently, a lot of…