Related papers: Central Counterparty Risk
Clustering algorithms are widely used in many societal resource allocation applications, such as loan approvals and candidate recruitment, among others, and hence, biased or unfair model outputs can adversely impact individuals that rely on…
Credibility theory provides tools to obtain better estimates by combining individual data with sample information. We apply the Credibility theory to a Uniform distribution that is used in testing the reliability of forecasting an interest…
We consider financial networks, where banks are connected by contracts such as debts or credit default swaps. We study the clearing problem in these systems: we want to know which banks end up in a default, and what portion of their…
The main result of this paper is a collateralized counterparty valuation adjusted pricing equation, which allows to price a deal while taking into account credit and debit valuation adjustments (CVA, DVA) along with margining and funding…
Economic institutions often influence market outcomes not by directly controlling sellers' menus, but by shaping the market composition sellers face. We study the welfare effects of this upstream choice in a monopoly screening model. An…
Companies do not operate in a vacuum. As companies move towards an increasingly specialized production function and their reach is becoming truly global, their aptitude in managing and shaping their inter-organizational network is a…
In this paper we develop a tractable structural model with analytical default probabilities depending on some dynamics parameters, and we show how to calibrate the model using a chosen number of Credit Default Swap (CDS) market quotes. We…
As the developed world replaces Defined Benefit (DB) pension plans with Defined Contribution (DC) plans, there is a need to develop decumulation strategies for DC plan holders. Optimal decumulation can be viewed as a problem in optimal…
Conformal prediction (CP) offers distribution-free marginal coverage guarantees under an exchangeability assumption, but these guarantees can fail if the data distribution shifts. We analyze the use of pseudo-calibration as a tool to…
We introduce a class of copulas that we call Principal Component Copulas (PCCs). This class combines the strong points of copula-based techniques with principal component analysis (PCA), which results in flexibility when modelling tail…
An active margin system for margin loans is proposed for Chinese margin lending market, which uses cash and randomly selected stock as collateral. The conditional probability of negative return(CPNR) after a forced sale of securities from…
Based on supermodularity ordering properties, we show that convex risk measures of credit losses are nondecreasing w.r.t. credit-credit and, in a wrong-way risk setup, credit-market, covariances of elliptically distributed latent factors.…
This paper builds a finite-horizon model to study the role of physical collateral in a model of strategic defaults, when the borrower can develop reputation for honesty. Asset ownership increases attractiveness of the reputational channel:…
Credit scoring is an essential tool used by global financial institutions and credit lenders for financial decision making. In this paper, we introduce a new method based on Gaussian Mixture Model (GMM) to forecast the probability of…
A standard quantitative method to access credit risk employs a factor model based on joint multivariate normal distribution properties. By extending a one-factor Gaussian copula model to make a more accurate default forecast, this paper…
We extract firms' cyber risk with a machine learning algorithm measuring the proximity between their disclosures and a dedicated cyber corpus. Our approach outperforms dictionary methods, uses full disclosure and not devoted-only sections,…
The present work studies and analyzes general defaultable OTC contract in presence of a contingent CSA, which is a theoretical counterparty risk mitigation mechanism of switching type that allows the counterparty of a general OTC contract…
One of the most challenging aspects in the analysis and modelling of financial markets, including Credit Default Swap (CDS) markets, is the presence of an emergent, intermediate level of structure standing in between the microscopic…
In the peer to peer (P2P) lending platform, investors hope to maximize their return while minimizing the risk through a comprehensive understanding of the P2P market. A low and stable average default rate across all the borrowers denotes a…
We consider a large random network, in which the performance of a node depends upon that of its neighbours and some external random influence factors. This results in random vector valued fixed-point (FP) equations in large dimensional…