Related papers: A Random Matrix Approach to Credit Risk
This note discusses some of the aspects of a model for the covariance of equity returns based on a simple "isotropic" structure in which all pairwise correlations are taken to be the same value. The effect of the structure on feasible…
Random shifting typically appears in credibility models whereas random scaling is often encountered in stochastic models for claim sizes reflecting the time-value property of money. In this article we discuss some aspects of random shifting…
Multivariate Distributions are needed to capture the correlation structure of complex systems. In previous works, we developed a Random Matrix Model for such correlated multivariate joint probability density functions that accounts for the…
We model systemic risk using a common factor that accounts for market-wide shocks and a tail dependence factor that accounts for linkages among extreme stock returns. Specifically, our theoretical model allows for firm-specific impacts of…
We give a detailed account of correlations between credit sector/quality and treasury curve factors, using the robust framework of the Barclays POINT Global Risk Model. Consistent with earlier studies, we find a strong negative correlation…
A Value-at-Risk based model is proposed to compute the adequate equity capital necessary to cover potential losses due to operational risks, such as human and system process failures, in banking organizations. Exploring the analogy to a…
Aggregate and systemic risk in complex systems are emergent phenomena depending on two properties: the idiosyncratic risks of the elements and the topology of the network of interactions among them. While a significant attention has been…
In many situations, the statistical properties of wave systems with chaotic classical limits are well-described by random matrix theory. However, applications of random matrix theory to scattering problems require introduction of system…
We propose a Gaussian-copula-based framework that learns deal-level dependence directly from observed joint success frequencies across founder, geography, and market attributes. Holding marginal deal success probabilities fixed, deal-level…
We provide a framework for detecting relevant insurance companies in a systemic risk perspective. Among the alternative methodologies for measuring systemic risk, we propose a complex network approach where insurers are linked to form a…
We use the Kac-Rice formula and results from random matrix theory to obtain the average number of critical points of a family of high-dimensional empirical loss functions, where the data are correlated $d$-dimensional Gaussian vectors,…
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…
We develop a general approach for stress testing correlations of financial asset portfolios. The correlation matrix of asset returns is specified in a parametric form, where correlations are represented as a function of risk factors, such…
In this paper we study the effect of network structure between agents and objects on measures for systemic risk. We model the influence of sharing large exogeneous losses to the financial or (re)insuance market by a bipartite graph. Using…
We discuss the use of saddlepoint methods in the analysis of portfolios, with particular reference to credit portfolios. The objective is to proceed from a model of the loss distribution, given through probabilities, correlations and the…
We consider the problem of concurrent portfolio losses in two non-overlapping credit portfolios. In order to explore the full statistical dependence structure of such portfolio losses, we estimate their empirical pairwise copulas. Instead…
This paper examines the applicability of Random Matrix Theory to portfolio management in finance. Starting from a group of normally distributed stochastic processes with given correlations we devise an algorithm for removing noise from the…
We analyze the stability of financial investment networks, where financial institutions hold overlapping portfolios of assets. We consider the effect of portfolio diversification and heterogeneous investments using a random matrix dynamical…
We propose a random matrix model that interpolates between the chiral random matrix ensembles and the chiral Poisson ensemble. By mapping this model on a non-interacting Fermi-gas we show that for energy differences less than a critical…
We analyse the structure of the distribution of eigenvalues of the stock market correlation matrix with increasing length of the time series representing the price changes. We use 100 highly-capitalized stocks from the American market and…