Related papers: Defining, Estimating and Using Credit Term Structu…

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…

Protection of creditors is a key objective of financial regulation. Where the protection needs are high, i.e., in banking and insurance, regulatory solvency requirements are an instrument to prevent that creditors incur losses on their…

We provide a general construction of convex roof measures of coherence. This construction is based on arbitrary coherence measures of pure states in the framework of resource theory of coherence. Convex roof measures of coherence bound from…

One of the crucial problems in mathematical finance is to mitigate the risk of a financial position by setting up hedging positions of eligible financial securities. This leads to focusing on set-valued maps associating to any financial…

We revisit the recently introduced concept of return risk measures (RRMs) and extend it by incorporating risk management via multiple so-called eligible assets. The resulting new class of risk measures, termed multi-asset return risk…

Quantifying how distinguishable two stochastic processes are lies at the heart of many fields, such as machine learning and quantitative finance. While several measures have been proposed for this task, none have universal applicability and…

Procyclicality of historical risk measure estimation means that one tends to over-estimate future risk when present realized volatility is high and vice versa under-estimate future risk when the realized volatility is low. Out of it…

Dynamic spectral risk measures define a claim's valuation bounds as supremum and infimum of expectations of the claim's payoff over a dominated set of measures. The measures at which such extrema are attained are called extreme measures. We…

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.…

We propose a model for the credit markets in which the random default times of bonds are assumed to be given as functions of one or more independent "market factors". Market participants are assumed to have partial information about each of…

We consider a structural credit model for a large portfolio of credit risky assets where the correlation is due to a market factor. By considering the large portfolio limit of this system we show the existence of a density process for the…

Prediction of future observations is an important and challenging problem. The two mainstream approaches for quantifying prediction uncertainty use prediction regions and predictive distributions, respectively, with the latter believed to…

Risk measures for random vectors have been considered in multi-asset markets with transaction costs and financial networks in the literature. While the theory of set-valued risk measures provide an axiomatic framework for assigning to a…

We propose a definition of diversification as a binary relationship between financial portfolios. According to it, a convex linear combination of several risk positions with some weights is considered to be less risky than the probabilistic…

We establish sharp upper and lower bounds for distortion risk metrics under distributional uncertainty. The uncertainty sets are characterized by four key features of the underlying distribution: mean, variance, unimodality, and Wasserstein…

In complete markets, there are risky assets and a riskless asset. It is assumed that the riskless asset and the risky asset are traded continuously in time and that the market is frictionless. In this paper, we propose a new method for…

We expose a theoretical hedging optimization framework with variational preferences under convex risk measures. We explore a general dual representation for the composition between risk measures and utilities. We study the properties of the…

Environmental contours are tools frequently used in the early design of marine structures. They provide a description of critical design conditions and serve as a means for simplifying expensive long-term response calculations. Here, we…

Recently, financial industry and regulators have enhanced the debate on the good properties of a risk measure. A fundamental issue is the evaluation of the quality of a risk estimation. On the one hand, a backtesting procedure is desirable…

Different approaches to defining dynamic market risk measures are available in the literature. Most are focused or derived from probability theory, economic behavior or dynamic programming. Here, we propose an approach to define and…