Related papers: A Loan Portfolio Model Subject to Random Liabiliti…
This paper considers the problem of measuring the credit risk in portfolios of loans, bonds, and other instruments subject to possible default under multi-factor models. Due to the amount of the portfolio, the heterogeneous effect of…
Mortgage default rates, on the one hand, serve as a measure of economic health to support decision-making by insurance companies, and on the other hand, is a key risk factor in the asset-liability management (ALM) practice, as mortgage…
This paper is devoted to study the optimal portfolio problem. Harry Markowitz's Ph.D. thesis prepared the ground for the mathematical theory of finance. In modern portfolio theory, we typically find asset returns that are modeled by a…
This paper focuses on a dynamic multi-asset mean-variance portfolio selection problem under model uncertainty. We develop a continuous time framework for taking into account ambiguity aversion about both expected return rates and…
The aggregation of individual risks in large credit and insurance portfolios is guided by diversification and the law of large numbers, which formalizes the convergence of sample averages to their means. At the same time, regulatory capital…
We study a portfolio selection problem in a continuous-time It\^o-Markov additive market with prices of financial assets described by Markov additive processes which combine L\'evy processes and regime switching models. Thus the model takes…
We provide an overview of the relationship between financial networks and systemic risk. We present a taxonomy of different types of systemic risk, differentiating between direct externalities between financial organizations (e.g.,…
This paper studies a variation of the continuous-time mean-variance portfolio selection where a tracking-error penalization is added to the mean-variance criterion. The tracking error term penalizes the distance between the allocation…
Value at Risk (VaR) is a quantitative measure used to evaluate the risk linked to the potential loss of investment or capital. Estimation of the VaR entails the quantification of prospective losses in a portfolio of investments, using a…
Weighted empirical risk minimization is a common approach to prediction under distribution drift. This article studies its out-of-sample prediction error under nonstationarity. We provide a general decomposition of the excess risk into a…
The present paper provides a multi-period contagion model in the credit risk field. Our model is an extension of Davis and Lo's infectious default model. We consider an economy of n firms which may default directly or may be infected by…
We show how to reduce the problem of computing VaR and CVaR with Student T return distributions to evaluation of analytical functions of the moments. This allows an analysis of the risk properties of systems to be carefully attributed…
According to theoretical models of valuing risky corporate securities, risk of default is primary component in overall yield spread. However, sizable empirical literature considers it otherwise by giving more importance to non-default risk…
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Using a multivariate normal Copula function for the joint default…
In this paper we discuss a credit risk model with a pure jump L\'evy process for the asset value and an unobservable random barrier. The default time is the first time when the asset value falls below the barrier. Using the…
Jumps and market microstructure noise are stylized features of high-frequency financial data. It is well known that they introduce bias in the estimation of volatility (including integrated and spot volatilities) of assets, and many methods…
We analyze systems of agents sharing light-tailed risky claims issued by different financial objects. Assuming exponentially distributed claims, we obtain that both agents' and system's losses follow generalized exponential mixture…
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Under fairly general assumptions for the distribution of the total net…
The lifetime behaviour of loans is notoriously difficult to model, which can compromise a bank's financial reserves against future losses, if modelled poorly. Therefore, we present a data-driven comparative study amongst three techniques in…
We study the mean field approximation of a recent model of cascades on networks relevant to the investigation of systemic risk control in financial networks. In the model, the hypothesis of a trend reinforcement in the stochastic process…