Related papers: Asset Allocation under the Basel Accord Risk Measu…
Allocation tasks represent a class of problems where a limited amount of resources must be allocated to a set of entities at each time step. Prominent examples of this task include portfolio optimization or distributing computational…
In this paper, we propose a predictor-corrector type Consensus Based Optimization (CBO) algorithm on a convex feasible set. Our proposed algorithm generalizes the CBO algorithm in [11] to tackle a constrained optimization problem for the…
In this paper, we study capital allocation for dynamic risk measures, with an axiomatic approach but also by exploiting the relation between risk measures and BSDEs. Although there is a wide literature on capital allocation rules in a…
Effective risk control must make a tradeoff between the microprudential risk of exogenous shocks to individual institutions and the macroprudential risks caused by their systemic interactions. We investigate a simple dynamical model for…
We propose a data-driven Neural Network (NN) optimization framework to determine the optimal multi-period dynamic asset allocation strategy for outperforming a general stochastic target. We formulate the problem as an optimal stochastic…
The study seeks to develop an effective strategy based on the novel framework of statistical arbitrage based on graph clustering algorithms. Amalgamation of quantitative and machine learning methods, including the Kelly criterion, and an…
Facing the FRTB, banks need to allocate their capital to each business units or risk positions to evaluate the capital efficiency of their strategies. This paper proposes two computationally efficient allocation methods which are weighted…
On March 4th 2016 the Basel Committee on Banking Supervision published a consultative document where a new methodology, called the Standardized Measurement Approach (SMA), is introduced for computing Operational Risk regulatory capital for…
In this paper we consider the strategic asset allocation of an insurance company. This task can be seen as a special case of portfolio optimization. In the 1950s, Markowitz proposed to formulate portfolio optimization as a bicriteria…
In the context of risk measures, the capital allocation problem is widely studied in the literature where different approaches have been developed, also in connection with cooperative game theory and systemic risk. Although static capital…
We develop a dual-control method for approximating investment strategies in incomplete environments that emerge from the presence of trading constraints. Convex duality enables the approximate technology to generate lower and upper bounds…
We consider the convex minimization model with both linear equality and inequality constraints, and reshape the classic augmented Lagrangian method (ALM) by balancing its subproblems. As a result, one of its subproblems decouples the…
We show that some specific market risk measures implied by current international capital regulation (the Basel Accords and the Capital Adequacy Directive of the European Union) violate the obvious requirement of convexity in some regions in…
We formulate banks' capital optimization problem as a classic mean variance optimization, by leveraging an accurate linear approximation to the Shapely or Constrained Aumann-Shapley (CAS) allocation of max or nested max cost functions. This…
By mid 2004, the Basel Committee on Banking Supervision (BCBS) is epected to launch its final recommendations on minimum capital requirements in the banking industry. Although there is the intention to arrive at capital charges which concur…
Most recently, He and Yuan [arXiv:2108.08554, 2021] have proposed a balanced augmented Lagrangian method (ALM) for the canonical convex programming problem with linear constraints, which advances the original ALM by balancing its…
Optimal portfolio allocation is often formulated as a constrained risk problem, where one aims to minimize a risk measure subject to some performance constraints. This paper presents new Bayesian Optimization algorithms for such constrained…
The Basel II internal ratings-based (IRB) approach to capital adequacy for credit risk plays an important role in protecting the Australian banking sector against insolvency. We outline the mathematical foundations of regulatory capital for…
We study deterministic and stochastic primal-dual sub-gradient algorithms for distributed optimization of a separable objective function with global inequality constraints. In both algorithms, the norm of the Lagrangian multipliers are…
We consider a multi-agent optimization problem where agents subject to local, intermittent interactions aim to minimize a sum of local objective functions subject to a global inequality constraint and a global state constraint set. In…