Related papers: Regulatory Capital Modelling for Credit Risk
It is important for a portfolio manager to estimate and analyze recent portfolio volatility to keep the portfolio's risk within limit. Though the number of financial instruments in the portfolio can be very large, sometimes more than…
Regulatory requirements dictate that financial institutions must calculate risk capital (funds that must be retained to cover future losses) at least annually. Procedures for doing this have been well-established for many years, but recent…
Using an extended version of the credit risk model CreditRisk+, we develop a flexible framework with numerous applications amongst which we find stochastic mortality modelling, forecasting of death causes as well as profit and loss…
This paper concerns sequential computation of risk measures for financial data and asks how, given a risk measurement procedure, we can tell whether the answers it produces are `correct'. We draw the distinction between `external' and…
Diversification is a cornerstone of robust portfolio construction, yet its application remains fraught with challenges due to model uncertainty and estimation errors. Practitioners often rely on sophisticated, proprietary heuristics to…
This paper considers optimal control problem of a large insurance company under a fixed insolvency probability. The company controls proportional reinsurance rate, dividend pay-outs and investing process to maximize the expected present…
Research capacity is critical in understanding systemic risk and informing new regulation. Banking regulation has not kept pace with all the complexities of financial innovation. The academic literature on systemic risk is rapidly…
Cost-of-capital valuation is a well-established approach to the valuation of liabilities and is one of the cornerstones of current regulatory frameworks for the insurance industry. Standard cost-of-capital considerations typically rely on…
The theory of acceptance sets and their associated risk measures plays a key role in the design of capital adequacy tests. The objective of this paper is to investigate, in the context of bounded financial positions, the class of…
Management of systemic risk in financial markets is traditionally associated with setting (higher) capital requirements for market participants. There are indications that while equity ratios have been increased massively since the…
We develop a reinforcement learning (RL) framework for insurance loss reserving that formulates reserve setting as a finite-horizon sequential decision problem under claim development uncertainty, macroeconomic stress, and solvency…
In this contribution we consider the overall risk given as the sum of random subrisks $\mathbf{X}_j$ in the context of value-at-risk (VaR) based risk calculations. If we assume that the undertaking knows the parametric distribution family…
We introduce a dynamic credit portfolio framework where optimal investment strategies are robust against misspecifications of the reference credit model. The risk-averse investor models his fear of credit risk misspecification by…
The entropic risk measure is widely used in high-stakes decision-making across economics, management science, finance, and safety-critical control systems because it captures tail risks associated with uncertain losses. However, when data…
The frequent occurrence of natural disasters has posed significant challenges to society, necessitating the urgent development of effective risk management strategies. From the early informal community-based risk sharing mechanisms to…
The stability of a complex financial system may be assessed by measuring risk contagion between various financial institutions with relatively high exposure. We consider a financial network model using a bipartite graph of financial…
This paper considers the use for Value-at-Risk computations of the so-called Beta-Kotz distribution based on a general family of distributions including the classical Gaussian model. Actually, this work develops a new method for estimating…
In this paper, we deal with an axiomatic approach to default risk. We introduce the notion of a default risk measure, which generalizes the classical probability of default (PD), and allows to incorporate model risk in various forms. We…
We characterize optimal monetary policy when policy endogenously moves risk premia through redistribution across agents who differ in their willingness to bear risk. The analytical core is Marginal Risk Capacity, the covariance of monetary…
After the release of the final accounting standards for impairment in July 2014 by the IASB, banks will face the next significant methodological challenge after Basel 2. In this paper, first methodological thoughts are presented, and ways…