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Valuation adjustments are nowadays a common practice to include credit and liquidity effects in option pricing. Funding costs arising from collateral procedures, hedging strategies and taxes are added to option prices to take into account…
Accurate prediction of future loan defaults is a critical capability for financial institutions that provide lines of credit. For institutions that issue and manage extensive loan volumes, even a slight improvement in default prediction…
We present a dialogue on Funding Costs and Counterparty Credit Risk modeling, inclusive of collateral, wrong way risk, gap risk and possible Central Clearing implementation through CCPs. This framework is important following the fact that…
With the development of cloud computing, service computing, IoT(Internet of Things) and mobile Internet, the diversity and sociality of services are increasingly apparent. To meet the customized user demands, Service Ecosystem is emerging…
This paper is the continuation of "Pricing with coherent risk" and deals with further applications of coherent risk measures to problems of finance. First, we study the optimization problem. Three forms of this problem are considered.…
This script offers an implementation-oriented introduction to deep learning methods for solving and estimating high-dimensional dynamic stochastic models in economics and finance. Its starting point is the curse of dimensionality:…
How, and to what extent, does an interconnected financial system endogenously amplify external shocks? This paper attempts to reconcile some apparently different views emerged after the 2008 crisis regarding the nature and the relevance of…
In multi-state life insurance, an adequate balance between analytic tractability, computational efficiency, and statistical flexibility is of great importance. This might explain the popularity of Markov chain modelling, where matrix…
Elimination of unknowns in a system of differential equations is often required when analysing (possibly nonlinear) dynamical systems models, where only a subset of variables are observable. One such analysis, identifiability, often relies…
We study the impact of contagion in a network of firms facing credit risk. We describe an intensity based model where the homogeneity assumption is broken by introducing a random environment that makes it possible to take into account the…
Model checking undiscounted reachability and expected-reward properties on Markov decision processes (MDPs) is key for the verification of systems that act under uncertainty. Popular algorithms are policy iteration and variants of value…
This paper explores the application of Machine Learning techniques for pricing high-dimensional options within the framework of the Uncertain Volatility Model (UVM). The UVM is a robust framework that accounts for the inherent…
Due to the lack of reliable market information, building financial term-structures may be associated with a significant degree of uncertainty. In this paper, we propose a new term-structure interpolation method that extends classical spline…
The issue of model risk in default modeling has been known since inception of the Academic literature in the field. However, a rigorous treatment requires a description of all the possible models, and a measure of the distance between a…
Algorithmic systems make decisions that have a great impact in our lives. As our dependency on them is growing so does the need for transparency and holding them accountable. This paper presents a model for evaluating how transparent these…
Common asset holdings are widely believed to have been the primary vector of contagion in the recent financial crisis. We develop a network approach to the amplification of financial contagion due to the combination of overlapping…
Strategyproof mechanisms provide robust equilibrium with minimal assumptions about knowledge and rationality but can be unachievable in combination with other desirable properties such as budget-balance, stability against deviations by…
Variable Annuity (VA) products expose insurance companies to considerable risk because of the guarantees they provide to buyers of these products. Managing and hedging these risks requires insurers to find the value of key risk metrics for…
Feature models are widely used to capture the configuration space of software systems. Although automated reasoning has been studied for detecting problematic features and supporting configuration tasks, significantly less attention has…
We propose a portfolio approach for operational risk quantification based on a class of analytical models from which we derive new results on the correlation problem. In particular, we show that uniform correlation is a robust assumption…