Related papers: Valuation Algorithms for Structural Models of Fina…
In this paper we introduce a generalized extension of the Eisenberg-Noe model of financial contagion to allow for time dynamics of the interbank liabilities, including a dynamic examination of default risk. This framework separates the cash…
A Value-at-Risk based model is proposed to compute the adequate equity capital necessary to cover potential losses due to operational risks, such as human and system process failures, in banking organizations. Exploring the analogy to a…
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…
Structural causal models provide a formalism to express causal relations between variables of interest. Models and variables can represent a system at different levels of abstraction, whereby relations may be coarsened and refined according…
Missing values pose a persistent challenge in modern data science. Consequently, there is an ever-growing number of publications introducing new imputation methods in various fields. While many studies compare imputation approaches, they…
The research presented in this work is motivated by some recent papers regarding hedging and valuation of financial securities subject to funding costs, collateralization and counterparty credit risk. Our goal is to provide a sound…
Systemic risk is a rapidly developing area of research. Classical financial models often do not adequately reflect the phenomena of bubbles, crises, and transitions between them during credit cycles. To study very improbable events,…
We analyze the valuation partial differential equation for European contingent claims in a general framework of stochastic volatility models where the diffusion coefficients may grow faster than linearly and degenerate on the boundaries of…
The vast majority of market impact studies assess each product individually, and the interactions between the different order flows are disregarded. This strong approximation may lead to an underestimation of trading costs and possible…
In structural credit risk models, default events and the ensuing losses are both derived from the asset values at maturity. Hence it is of utmost importance to choose a distribution for these asset values which is in accordance with…
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…
We consider the supervised learning problem of learning the price of an option or the implied volatility given appropriate input data (model parameters) and corresponding output data (option prices or implied volatilities). The majority of…
Motivated by the dynamic assortment offerings and item pricings occurring in e-commerce, we study a general problem of allocating finite inventories to heterogeneous customers arriving sequentially. We analyze this problem under the…
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…
The paper studies derivative asset analysis in structural credit risk models where the asset value of the firm is not fully observable. It is shown that in order to compute the price dynamics of traded securities one needs to solve a…
In this chapter, an input-output economic model with multiple interactive economic systems is considered. The model captures the multi-dimensional nature of the economic sectors or industries in each economic system, the interdependencies…
Since the latest financial crisis, the idea of systemic risk has received considerable interest. In particular, contagion effects arising from cross-holdings between interconnected financial firms have been studied extensively. Drawing…
A risk-neutral valuation framework is developed for pricing and hedging in-play football bets based on modelling scores by independent Poisson processes with constant intensities. The Fundamental Theorems of Asset Pricing are applied to…
How do we assign value to economic transactions? To answer this question, we must consider whether the value of objects is inherent, is a product of social interaction, or involves other mechanisms. Economic theory predicts that there is an…
There exists a range of different models for estimating and simulating credit risk transitions to optimally manage credit risk portfolios and products. In this chapter we present a Coupled Markov Chain approach to model rating transitions…