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In portfolio optimization problems, the minimum expected investment risk is not always smaller than the expected minimal investment risk. That is, using a well-known approach from operations research, it is possible to derive a strategy…
This paper presents an analysis of technical debt management through resources allocation policies in software maintenance process during its operation to demonstrate how different strategies leads to the emergence of different behaviors…
A continuous-time consumption-investment model with constraint is considered for a small investor whose decisions are the consumption rate and the allocation of wealth to a risk-free and a risky asset with logarithmic Brownian motion…
Traditional recommendation systems make recommendations based solely on the customer's past purchases, product ratings and demographic data without considering the profitability the items being recommended. In this work we study the…
Risk scoring systems are widely used in high-stakes domains to assist decision-making. However, existing approaches often focus on optimizing predictive accuracy or likelihood-based criteria, which may not align with the main goal of…
We consider the problem of forecasting debt recovery from large portfolios of non-performing unsecured consumer loans under management. The state of the art in industry is to use stochastic processes to approximately model payment behaviour…
The recent banking crisis has again emphasized the importance of understanding and mitigating systemic risk in financial networks. In this paper, we study a market-driven approach to rescue a bank in distress based on the idea of claims…
We theoretically and empirically study portfolio optimization under transaction costs and establish a link between turnover penalization and covariance shrinkage with the penalization governed by transaction costs. We show how the ex ante…
A macroeconomic model based on the economic variables (i) assets, (ii) leverage (defined as debt over asset) and (iii) trust (defined as the maximum sustainable leverage) is proposed to investigate the role of credit in the dynamics of…
We investigate how and when to diversify capital over assets, i.e., the portfolio selection problem, from a signal processing perspective. To this end, we first construct portfolios that achieve the optimal expected growth in i.i.d.…
Traditional approaches to financial asset allocation start with returns forecasting followed by an optimization stage that decides the optimal asset weights. Any errors made during the forecasting step reduce the accuracy of the asset…
Analytical, free of time consuming Monte Carlo simulations, framework for credit portfolio systematic risk metrics calculations is presented. Techniques are described that allow calculation of portfolio-level systematic risk measures…
In this paper, we investigate a financial market model consisting of a risky asset, modeled as a general diffusion parameterized by a scale function and a speed measure, and a bank account process with a constant interest rate. This…
The interconnectedness of financial institutions affects instability and credit crises. To quantify systemic risk we introduce here the PD model, a dynamic model that combines credit risk techniques with a contagion mechanism on the network…
Calibrating blackbox machine learning models to achieve risk control is crucial to ensure reliable decision-making. A rich line of literature has been studying how to calibrate a model so that its predictions satisfy explicit finite-sample…
Determining contributions by sub-portfolios or single exposures to portfolio-wide economic capital for credit risk is an important risk measurement task. Often economic capital is measured as Value-at-Risk (VaR) of the portfolio loss…
Banks and financial institutions all over the world manage portfolios containing tens of thousands of customers. Not all customers are high credit-worthy, and many possess varying degrees of risk to the Bank or financial institutions that…
We study market-to-book ratios of stocks in the context of Stochastic Portfolio Theory. Functionally generated portfolios that depend on auxiliary economic variables other than relative capitalizations ("sizes") are developed in two ways,…
We study how an e-commerce firm should make real-time fulfillment decisions in a two-layer distribution network when multi-item customer orders arrive sequentially and future demand is unknown. The central managerial tension is whether to…
Transfer learning is an emerging and popular paradigm for utilizing existing knowledge from previous learning tasks to improve the performance of new ones. In this paper, we propose a novel concept of transfer risk and and analyze its…