Related papers: Asset Allocation under the Basel Accord Risk Measu…
The management of operational risk in the banking industry has undergone significant changes over the last decade due to substantial changes in operational risk environment. Globalization, deregulation, the use of complex financial products…
Risk allocation, the decomposition of a portfolio-wide risk measure into component contributions, is a fundamental problem in financial risk management due to the non-additive nature of risk measures, the layered organizational structures…
Banks must optimize risky investments, dividend payouts, and capital structure under tight Basel III solvency and liquidity constraints, while costly equity issuance serves as a distress-recovery tool. We formulate this as a stochastic…
The banking systems that deal with risk management depend on underlying risk measures. Following the Basel II accord, there are two separate methods by which banks may determine their capital requirement. The Value at Risk measure plays an…
Strategic asset allocation requires an investor to select stocks from a given basket of assets. The perspective of our investor is to maximize risk-adjusted alpha returns relative to a benchmark index. Historical returns are used to provide…
We contribute improvements to a Lagrangian dual solution approach applied to large-scale optimization problems whose objective functions are convex, continuously differentiable and possibly nonlinear, while the non-relaxed constraint set is…
Firms should keep capital to offer sufficient protection against the risks they are facing. In the insurance context methods have been developed to determine the minimum capital level required, but less so in the context of firms with…
The European insurance sector will soon be faced with the application of Solvency 2 regulation norms. It will create a real change in risk management practices. The ORSA approach of the second pillar makes the capital allocation an…
During recent years the counterparty risk subject has received a growing attention because of the so called Basel Accord. In particular the Basel III Accord asks the banks to fulfill finer conditions concerning counterparty credit exposures…
To quantify the operational risk capital charge under the current regulatory framework for banking supervision, referred to as Basel II, many banks adopt the Loss Distribution Approach. There are many modeling issues that should be resolved…
We set the context for capital approximation within the framework of the Basel II / III regulatory capital accords. This is particularly topical as the Basel III accord is shortly due to take effect. In this regard, we provide a summary of…
Risk aggregation is a popular method used to estimate the sum of a collection of financial assets or events, where each asset or event is modelled as a random variable. Applications, in the financial services industry, include insurance,…
Solvency II Directive 2009/138/EC requires an insurance and reinsurance undertakings assessment of a Solvency Capital Requirement by means of the so-called "Standard Formula" or by means of partial or full internal models. Focusing on the…
The augmented Lagrangian method (ALM) is a classical optimization tool that solves a given "difficult" (constrained) problem via finding solutions of a sequence of "easier"(often unconstrained) sub-problems with respect to the original…
Motivated by broad applications in various fields of engineering, we study a network resource allocation problem where the goal is to optimally allocate a fixed quantity of resources over a network of nodes. We consider large scale networks…
The largest US banks are required by regulatory mandate to estimate the operational risk capital they must hold using an Advanced Measurement Approach (AMA) as defined by the Basel II/III Accords. Most use the Loss Distribution Approach…
In this paper, we consider a class of convex programming problems with linear equality constraints, which finds broad applications in machine learning and signal processing. We propose a new adaptive balanced augmented Lagrangian (ABAL)…
This paper aims to develop distributed algorithms for nonconvex optimization problems with complicated constraints associated with a network. The network can be a physical one, such as an electric power network, where the constraints are…
In this paper we present complexity certification results for a distributed Augmented Lagrangian (AL) algorithm used to solve convex optimization problems involving globally coupled linear constraints. Our method relies on the Accelerated…
A justification of the Basel liquidity formula for risk capital in the trading book is given under the assumption that market risk-factor changes form a Gaussian white noise process over 10-day time steps and changes to P&L are linear in…