Related papers: Beyond cash-additive risk measures: when changing …
Whenever dealing with horizons of different times scales, risk evaluation of losses may incur in both interest rate uncertainty and horizon risk as introduced in [11]. With the goal to capture both effects, we work with cash subadditive…
Credit capital requirements in Internal Rating Based approaches require the calibration of two key parameters: the probability of default and the loss-given-default. This letter considers the uncertainty about these two parameters and…
In recent years, it has become apparent that an isolated microprudential approach to capital adequacy requirements of individual institutions is insufficient. It can increase the homogeneity of the financial system and ultimately the cost…
The main goal of this paper is to investigate under which conditions cash-subadditive convex dynamic risk measures are time-consistent. Proceeding as in Detlefsen and Scandolo \cite{detlef-scandolo} and inspired by their result, we give a…
We study a static portfolio optimization problem with two risk measures: a principle risk measure in the objective function and a secondary risk measure whose value is controlled in the constraints. This problem is of interest when it is…
This seemed impossible to use a theoretically adequate but too sophisticated risk measure called non-ruin capital, whence its widespread (including regulatory documents) replacement with an inadequate, but simple risk measure called…
Systemic risk is concerned with the instability of a financial system whose members are interdependent in the sense that the failure of a few institutions may trigger a chain of defaults throughout the system. Recently, several systemic…
It is shown that the axioms for coherent risk measures imply that whenever there is an asset in a portfolio that dominates the others in a given sample (which happens with finite probability even for large samples), then this portfolio…
In this three-part series of papers, we argue that the conventional spread measures are not well defined for credit-risky bonds and introduce a set of credit term structures which correct for the biases associated with the strippable cash…
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…
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.…
Any solvency regime for financial institutions should be aligned with the fundamental objectives of regulation: protecting liability holders and securing the stability of the financial system. The first objective leads to consider…
Systemic risk is the risk that a company- or industry-level risk could trigger a huge collapse of another or even the whole institution. Various systemic risk measures have been proposed in the literature to quantify the domino and…
Conditional forecasts of risk measures play an important role in internal risk management of financial institutions as well as in regulatory capital calculations. In order to assess forecasting performance of a risk measurement procedure,…
Risk measures satisfying the axiom of comonotonic additivity are extensively studied, arguably because of the plethora of results indicating interesting aspects of such risk measures. Recent research, however, has shown that this axiom is…
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…
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…
In the paper we develop mathematical tools of quantile hedging in incomplete market. Those could be used for two significant applications: o calculating the \textbf{optimal capital requirement imposed by Solvency II} (Directive 2009/138/EC…
This paper compares two different frameworks recently introduced in the literature for measuring risk in a multi-period setting. The first corresponds to applying a single coherent risk measure to the cumulative future costs, while the…
In this paper monetary risk measures that are positively superhomogeneous, called star-shaped risk measures, are characterized and their properties studied. The measures in this class, which arise when the controversial subadditivity…