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This article proposes a method for measuring the latent risks involved in the recovery process of non performing loans in financial institutions and business firms that deal with collection and recovery processes. To that end, we apply the…
The failure of key financial institutions may accelerate risk contagion due to their interconnections within the system. In this paper, we propose a robust portfolio strategy to mitigate systemic risks during extreme events. We use the…
This paper proposes and motivates a dynamical model of the Chinese stock market based on a linear regression in a dual state space connected to the original state space of correlations between the volume-at-price buckets by a Fourier…
Networked-guarantee loans may cause the systemic risk related concern of the government and banks in China. The prediction of default of enterprise loans is a typical extremely imbalanced prediction problem, and the networked-guarantee make…
This paper considers the problem of optimal liquidation of a position in a risky security in a financial market, where price evolution are risky and trades have an impact on price as well as uncertainty in the filling orders. The problem is…
Automated trading systems on developed and emerging capital markets are studied in this paper. The standard for developed market is automated trading system with 40-days simple moving average. We tested it for the index SIX Industrial for…
In FX cash markets, market makers provide liquidity to clients for a wide variety of currency pairs. Because of flow uncertainty and market volatility, they face inventory risk. To mitigate this risk, they typically skew their prices to…
This study presents an agent-based computational cross-market model for Chinese equity market structure, which includes both stocks and CSI 300 index futures. In this model, we design several stocks and one index futures to simulate this…
When a loan is approved for a person or company, the bank is subject to \emph{credit risk}; the risk that the lender defaults. To mitigate this risk, a bank will require some form of \emph{security}, which will be collected if the lender…
This study considers an optimal reinsurance, investment, and dividend strategy control problem for insurance companies in a regulated Markov regime-switching environment, intending to maximize long-run average reward. Unlike existing single…
The practice of valuation by marking-to-market with current trading prices is seriously flawed. Under leverage the problem is particularly dramatic: due to the concave form of market impact, selling always initially causes the expected…
We introduce a two-agent problem which is inspired by price asymmetry arising from funding difference. When two parties have different funding rates, the two parties deduce different fair prices for derivative contracts even under the same…
Uncovering the risk transmitting path within economic sectors in China is crucial for understanding the stability of the Chinese economic system, especially under the current situation of the China-US trade conflicts. In this paper, we try…
We consider an illiquid financial market with different regimes modeled by a continuous-time finite-state Markov chain. The investor can trade a stock only at the discrete arrival times of a Cox process with intensity depending on the…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading volume amounts when the dynamics of the risky asset returns are governed by a discrete-time approximation of the Markov-modulated geometric…
Operational risk is the risk relative to monetary losses caused by failures of bank internal processes due to heterogeneous causes. A dynamical model including both spontaneous generation of losses and generation via interactions between…
An empirical analysis, suggested by optimal Merton dynamics, reveals some unexpected features of asset volumes. These features are connected to traders' belief and risk aversion. This paper proposes a trading strategy model in the optimal…
A Markovian modulation captures the trend in the market and influences the market coefficients accordingly. The different scenarios presented by the market are modeled as the distinct states of a discrete-time Markov chain. In our paper, we…
Management of systemic risk in financial markets is traditionally associated with setting (higher) capital requirements for market participants. There are indications that while equity ratios have been increased massively since the…
Previous literature shows that prevalent risk measures such as Value at Risk or Expected Shortfall are ineffective to curb excessive risk-taking by a tail-risk-seeking trader with S-shaped utility function in the context of portfolio…