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We propose a model and an estimation technique to distinguish systemic risk and contagion in credit risk. The main idea is to assume, for a set of $d$ obligors, a set of $d$ idiosyncratic shocks and a shock that triggers the default of all…
In normal times, it is assumed that financial institutions operating in non-overlapping sectors have complementary and distinct outcomes, typically reflected in mostly uncorrelated outcomes and asset returns. Such is the reasoning behind…
In several applications such as clinical trials and financial portfolio optimization, the expected value (or the average reward) does not satisfactorily capture the merits of a drug or a portfolio. In such applications, risk plays a crucial…
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…
Despite the simplicity and intuitive interpretation of Minimum Mean Squared Error (MMSE) estimators, their effectiveness in certain scenarios is questionable. Indeed, minimizing squared errors on average does not provide any form of…
Systemic risk is concerned with the instability of a financial system whose members are interdependent in the sense that the failure of a few institutions may trigger a chain of defaults throughout the system. Recently, several systemic…
By means of the techniques of Boolean valued analysis, we provide a transfer principle between duality theory of classical convex risk measures and duality theory of conditional risk measures. Namely, a conditional risk measure can be…
A classical result in risk measure theory states that every coherent risk measure has a dual representation as the supremum of certain expected value over a risk envelope. We study this topic in more detail. The related issues include: 1.…
A risk analyst assesses potential financial losses based on multiple sources of information. Often, the assessment does not only depend on the specification of the loss random variable but also various economic scenarios. Motivated by this…
We characterize when a convex risk measure associated to a law-invariant acceptance set in $L^\infty$ can be extended to $L^p$, $1\leq p<\infty$, preserving finiteness and continuity. This problem is strongly connected to the statistical…
We study a class of dynamically consistent risk measures that robustify a time-homogeneous Markovian reference model by allowing for distributional uncertainty in its transition laws. We start from one-step convex risk evaluations in which…
Measuring the contribution of a bank or an insurance company to overall systemic risk is a key concern, particularly in the aftermath of the 2007--2009 financial crisis and the 2020 downturn. In this paper, we derive worst-case and…
Marginal expected shortfall is unquestionably one of the most popular systemic risk measures. Studying its extreme behaviour is particularly relevant for risk protection against severe global financial market downturns. In this context,…
We investigate the effects of the social interactions of a finite set of agents on an equilibrium pricing mechanism. A derivative written on non-tradable underlyings is introduced to the market and priced in an equilibrium framework by…
This paper introduces a new type of risk measures, namely regime switching entropic risk measures, and study their applicability through simulations. The state of the economy is incorporated into the entropic risk formulation by using a…
Expectile, as the minimizer of an asymmetric quadratic loss function, is a coherent risk measure and is helpful to use more information about the distribution of the considered risk. In this paper, we propose a new risk measure by replacing…
A novel confidence interval estimator is proposed for the risk difference in noninferiority binomial trials. The confidence interval is consistent with an exact unconditional test that preserves the type-I error, and has improved power,…
To find a trade-off between profitability and prudence, financial practitioners need to choose appropriate risk measures. Two key points are: Firstly, investors' risk attitudes under uncertainty conditions should be an important reference…
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…
This paper is devoted to proposing a new asymmetric risk-sensitive criterion involving different risk attitudes toward varying risk sources. The criterion can only be defined through the initial value of the minimal solutions of quadratic…