Related papers: A new approach for scenario generation in Risk man…
Scenario generation is the construction of a discrete random vector to represent parameters of uncertain values in a stochastic program. Most approaches to scenario generation are distribution-driven, that is, they attempt to construct a…
In this paper we propose a problem-driven scenario generation approach to the single-period portfolio selection problem which use tail risk measures such as conditional value-at-risk. Tail risk measures are useful for quantifying potential…
Economic Scenario Generators (ESGs) simulate economic and financial variables forward in time for risk management and asset allocation purposes. It is often not feasible to calibrate the dynamics of all variables within the ESG to…
Mathematical modelling is ubiquitous in the financial industry and drives key decision processes. Any given model provides only a crude approximation to reality and the risk of using an inadequate model is hard to detect and quantify. By…
We introduce methodology to bridge scenario analysis and model-based risk forecasting, leveraging their respective strengths in policy settings. Our Bayesian framework addresses the fundamental challenge of reconciling judgmental narrative…
This paper introduces a new approach to generating sample paths of unknown Markovian stochastic differential equations (SDEs) using diffusion models, a class of generative AI methods commonly employed in image and video applications. Unlike…
This paper formed part of a preliminary research report for a risk consultancy and academic research. Stochastic Programming models provide a powerful paradigm for decision making under uncertainty. In these models the uncertainties are…
In this paper, we present a novel approach to the generation of virtual scenarios of multivariate financial data of arbitrary length and composition of assets. With this approach, decades of realistic time-synchronized data can be simulated…
Generating safety-critical scenarios is essential for testing and verifying the safety of autonomous vehicles. Traditional optimization techniques suffer from the curse of dimensionality and limit the search space to fixed parameter spaces.…
This paper presents a scenario generation framework that creates diverse, parametrized, and safety-critical driving situations to validate the safety features of autonomous vehicles in simulation [15]. By modeling factors such as road…
Systemic risk is a rapidly developing area of research. Classical financial models often do not adequately reflect the phenomena of bubbles, crises, and transitions between them during credit cycles. To study very improbable events,…
Financial markets have developed a lot of strategies to control risks induced by market fluctuations. Mathematics has emerged as the leading discipline to address fundamental questions in finance as asset pricing model and hedging…
Mathematical models, calibrated to data, have become ubiquitous to make key decision processes in modern quantitative finance. In this work, we propose a novel framework for data-driven model selection by integrating a classical…
We consider solution of stochastic storage problems through regression Monte Carlo (RMC) methods. Taking a statistical learning perspective, we develop the dynamic emulation algorithm (DEA) that unifies the different existing approaches in…
Scenario-based testing is becoming increasingly important in safety assurance for automated driving. However, comprehensive and sufficiently complete coverage of the scenario space requires significant effort and resources if using only…
Stochastic Differential Equations (SDEs) are used as statistical models in many disciplines. However, intractable likelihood functions for SDEs make inference challenging, and we need to resort to simulation-based techniques to estimate and…
Continuous intraday electricity markets play an increasingly important role in short-term trading and balancing, yet decision-making under rapidly evolving price dynamics remains challenging. This paper proposes a comprehensive framework…
In this paper, we examine the capacity of an arbitrage-free neural-SDE market model to produce realistic scenarios for the joint dynamics of multiple European options on a single underlying. We subsequently demonstrate its use as a risk…
In the financial services industry, forecasting the risk factor distribution conditional on the history and the current market environment is the key to market risk modeling in general and value at risk (VaR) model in particular. As one of…
This paper presents a distributed stochastic model predictive control (SMPC) approach for large-scale linear systems with private and common uncertainties in a plug-and-play framework. Using the so-called scenario approach, the centralized…