Related papers: The Quantification of Operational Risk using Inter…
Banks must optimize risky investments, dividend payouts, and capital structure under tight Basel III solvency and liquidity constraints, while costly equity issuance serves as a distress-recovery tool. We formulate this as a stochastic…
In statistical practice, whether a Bayesian or frequentist approach is used in inference depends not only on the availability of prior information but also on the attitude taken toward partial prior information, with frequentists tending to…
Recently, Basel Committee for Banking Supervision proposed to replace all approaches, including Advanced Measurement Approach (AMA), for operational risk capital with a simple formula referred to as the Standardised Measurement Approach…
The Solvency II Directive and Solvency Assessment and Management (the South African equivalent) give a Solvency Capital Requirement which is based on a 99.5% Value-at-Risk (VaR) calculation. This calculation involves aggregating individual…
A new procedure is presented for the objective comparison and evaluation of default definitions. This allows the lender to find a default threshold at which the financial loss of a loan portfolio is minimised, in accordance with Basel II.…
A novel dynamical model for the study of operational risk in banks and suitable for the calculation of the Value at Risk (VaR) is proposed. The equation of motion takes into account the interactions among different bank's processes, the…
This paper concerns sequential computation of risk measures for financial data and asks how, given a risk measurement procedure, we can tell whether the answers it produces are `correct'. We draw the distinction between `external' and…
A method for conducting Bayesian elicitation and learning in risk assessment is presented. It assumes that the risk process can be described as a fault tree. This is viewed as a belief network, for which prior distributions on primary event…
Banks and financial institutions all over the world manage portfolios containing tens of thousands of customers. Not all customers are high credit-worthy, and many possess varying degrees of risk to the Bank or financial institutions that…
Quantifying cyber risks is essential for organizations to grasp their vulnerability to threats and make informed decisions. However, current approaches still need to work on blending economic viewpoints to provide insightful analysis. To…
Even in the simple one-factor credit portfolio model that underlies the Basel II regulatory capital rules coming into force in 2007, the exact contributions to credit value-at-risk can only be calculated with Monte-Carlo simulation or with…
This paper considers the use for Value-at-Risk computations of the so-called Beta-Kotz distribution based on a general family of distributions including the classical Gaussian model. Actually, this work develops a new method for estimating…
We present a computational method for measuring financial risk by estimating the Value at Risk and Expected Shortfall from financial series. We have made two assumptions: First, that the predictive distributions of the values of an asset…
Facing the FRTB, banks need to allocate their capital to each business units or risk positions to evaluate the capital efficiency of their strategies. This paper proposes two computationally efficient allocation methods which are weighted…
In this paper are presented methods of impact analysis on informatics system security accidents, qualitative and quantitative methods, starting with risk and informational system security definitions. It is presented the relationship…
While observational data are routinely used to estimate causal effects of biomedical treatments, doing so requires special methods to adjust for observed confounding. These methods invariably rely on untestable statistical and causal…
Causal discovery is crucial for understanding complex systems and informing decisions. While observational data can uncover causal relationships under certain assumptions, it often falls short, making active interventions necessary. Current…
The existence of asymmetric information has always been a major concern for financial institutions. Financial intermediaries such as commercial banks need to study the quality of potential borrowers in order to make their decision on…
Estimating the covariance of asset returns, i.e., the risk model, is a key component of financial portfolio construction and evaluation. Most risk modeling approaches produce a factor model that decomposes the asset variability into two…
Exposure characterization in regional risk assessment aims to assign physical properties to the assets of interest so they can be associated with damage and loss functions. While this process has benefited from the growing availability of…