Related papers: Cash Sub-additive Risk Measures and Interest Rate …
The NA condition is one of the pillars supporting the classical theory of financial mathematics. We revisit this condition for financial market models where a dynamic risk-measure defined on $L^0$ is fixed to characterize the family of…
The purpose of this research article is to discover how the econophysics analysis can complement the econometrics models in application to the risk management in the central banks and financial institutions, operating within the nonlinear…
This paper investigates the finite horizon risk-sensitive portfolio optimization in a regime-switching credit market with physical and information-induced default contagion. It is assumed that the underlying regime-switching process has…
Stochastic optimization problems often involve the expectation in its objective. When risk is incorporated in the problem description as well, then risk measures have to be involved in addition to quantify the acceptable risk, often in the…
In this paper we develop a novel methodology for estimation of risk capital allocation. The methodology is rooted in the theory of risk measures. We work within a general, but tractable class of law-invariant coherent risk measures, with a…
We consider a singular control model of cash reserve management, driven by a diffusion under ambiguity. The manager is assumed to have maxmin preferences over a set of priors characterized by $\kappa$-ignorance. A verification theorem is…
We consider a general tractable model for default contagion and systemic risk in a heterogeneous financial network, subject to an exogenous macroeconomic shock. We show that, under some regularity assumptions, the default cascade model…
This article proposes a new class of risk-sharing rules by exploring the relationship between capital allocation and risk sharing. While the former is concerned with ex-ante allocating capitals to different lines of business within a…
The forecasting of credit default risk has been an active research field for several decades. Historically, logistic regression has been used as a major tool due to its compliance with regulatory requirements: transparency, explainability,…
Science and technology have a growing need for effective mechanisms that ensure reliable, controlled performance from black-box machine learning algorithms. These performance guarantees should ideally hold conditionally on the input-that is…
We study the properties of Expected Shortfall from the point of view of financial risk management. This measure --- which emerges as a natural remedy in some cases where Value at Risk (VaR) is not able to distinguish portfolios which bear…
In order to properly manage risk, practitioners must understand the aggregate risks they are exposed to. Additionally, to properly price policies and calculate bonuses the relative riskiness of individual business units must be well…
We address the statistical estimation of composite functionals which may be nonlinear in the probability measure. Our study is motivated by the need to estimate coherent measures of risk, which become increasingly popular in finance,…
This paper studies distributionally robust optimization for a rich class of risk measures with ambiguity sets defined by $\phi$-divergences. The risk measures are allowed to be non-linear in probabilities, are represented by Choquet…
The purpose of this paper is to describe and extend the use of the newly-introduced measure, residual estimation risk. Following the seminal work of Bignozzi and Tsanakas, the quantification of residual estimation risk is proposed in a…
In this article we propose a study of market models starting from a set of axioms, as one does in the case of risk measures. We define a market model simply as a mapping from the set of adapted strategies to the set of random variables…
The financial crisis showed the importance of measuring, allocating and regulating systemic risk. Recently, the systemic risk measures that can be decomposed into an aggregation function and a scalar measure of risk, received a lot of…
Working in a continuous time setting, we extend to the general case of dynamic risk measures continuous from above the characterization of time consistency in terms of ``cocycle condition'' of the minimal penalty function. We prove also the…
The banking systems that deal with risk management depend on underlying risk measures. Following the Basel II accord, there are two separate methods by which banks may determine their capital requirement. The Value at Risk measure plays an…
Due to their heterogeneity, insurance risks can be properly described as a mixture of different fixed models, where the weights assigned to each model may be estimated empirically from a sample of available data. If a risk measure is…