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Capital allocation is a procedure for quantifying the contribution of each source of risk to aggregated risk. The gradient allocation rule, also known as the Euler principle, is a prevalent rule of capital allocation under which the…
Managing data storage growth is of crucial importance to businesses. Poor practices can lead to large data and financial losses. Access to storage information along with timely action, or capacity forecasting, are essential to avoid these…
The vector autoregressive (VAR) model has been widely used for modeling temporal dependence in a multivariate time series. For large (and even moderate) dimensions, the number of AR coefficients can be prohibitively large, resulting in…
We study issues of robustness in the context of Quantitative Risk Management and Optimization. We develop a general methodology for determining whether a given risk measurement related optimization problem is robust, which we call…
High dimensional Vector Autoregressions (VAR) have received a lot of interest recently due to novel applications in health, engineering, finance and the social sciences. Three issues arise when analyzing VAR's: (a) The high dimensional…
Under the Fundamental Review of the Trading Book (FRTB) capital charges for the trading book are based on the coherent expected shortfall (ES) risk measure, which show greater sensitivity to tail risk. In this paper it is argued that…
Maximum likelihood estimation of large Markov-switching vector autoregressions (MS-VARs) can be challenging or infeasible due to parameter proliferation. To accommodate situations where dimensionality may be of comparable order to or…
Credit risk stress testing has become an important risk management device which is used both by banks internally and by regulators. Stress testing is complex because it essentially means projecting a bank's full balance sheet conditional on…
While environmental, social, and governance (ESG) trading activity has been a distinctive feature of financial markets, the debate if ESG scores can also convey information regarding a company's riskiness remains open. Regulatory…
Extreme value statistics (EVS) concerns the study of the statistics of the maximum or the minimum of a set of random variables. This is an important problem for any time-series and has applications in climate, finance, sports, all the way…
Owing to the potential higher energy supply efficiency and operation flexibility, integrated energy system (IES), which usually includes electric power, gas and heating/cooling systems, is considered as one of the primary forms of energy…
Despite the rapid advancements of electrocardiogram (ECG) signal diagnosis and analysis methods through deep learning, two major hurdles still limit their clinical adoption: the lack of versatility in processing ECG signals with diverse…
In this paper we introduce a novel approach to risk estimation based on nonlinear factor models - the "StressVaR" (SVaR). Developed to evaluate the risk of hedge funds, the SVaR appears to be applicable to a wide range of investments. Its…
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…
The vector autoregressive (VAR) model is a powerful tool in modeling complex time series and has been exploited in many fields. However, fitting high dimensional VAR model poses some unique challenges: On one hand, the dimensionality,…
Quantification of risk positions under model uncertainty is of crucial importance from both viewpoints of external regulation and internal management. The concept of model uncertainty, sometimes also referred to as model ambiguity. Although…
We consider market players with tail-risk-seeking behaviour as exemplified by the S-shaped utility introduced by Kahneman and Tversky. We argue that risk measures such as value at risk (VaR) and expected shortfall (ES) are ineffective in…
A Vector Auto-Regressive (VAR) model is commonly used to model multivariate time series, and there are many penalized methods to handle high dimensionality. However in terms of spatio-temporal data, most methods do not take the spatial and…
A factor-augmented vector autoregressive (FAVAR) model is defined by a VAR equation that captures lead-lag correlations amongst a set of observed variables $X$ and latent factors $F$, and a calibration equation that relates another set of…
This paper compares the Value--at--Risk (VaR) forecasts delivered by alternative model specifications using the Model Confidence Set (MCS) procedure recently developed by Hansen et al. (2011). The direct VaR estimate provided by the…