Related papers: Operational risk modeled analytically II: the cons…

Advanced classification algorithms are being increasingly used in safety-critical applications like health-care, engineering, etc. In such applications, miss-classifications made by ML algorithms can result in substantial financial or…

The quantification of diversification benefits due to risk aggregation plays a prominent role in the (regulatory) capital management of large firms within the financial industry. However, the complexity of today's risk landscape makes a…

The ongoing concern about systemic risk since the outburst of the global financial crisis has highlighted the need for risk measures at the level of sets of interconnected financial components, such as portfolios, institutions or members of…

The key concepts (calibration, discrimination, and discordance) important in understanding and comparing risk models are best conveyed graphically. To illustrate this, models predicting death and acute kidney injury in a large cohort of PCI…

We propose a general interpretation for long-range correlation effects in the activity and volatility of financial markets. This interpretation is based on the fact that the choice between `active' and `inactive' strategies is subordinated…

Return-risk models are the two pillars of modern portfolio theory, which are widely used to make decisions in choosing the loan portfolio of a bank. Banks and other financial institutions are subjected to limited liability protection.…

This paper, framed in a vast investigation, describes the application of techniques and methodologies in Organizational Engineering connected to the associated risk to the processes developed in an Emergency Service of an important…

In causal inference, interference occurs when the treatment of one unit may affect the outcomes of other units. The goal of this work is to serve as a guide to the use of linear outcome modeling for estimating causal effects in settings…

Regulatory stress tests have become one of the main tools for setting capital requirements at the largest U.S. banks. The Federal Reserve uses confidential models to evaluate bank-specific outcomes for bank-specific portfolios in shared…

In this paper, we propose a method that provides a useful technique to compare relationship between risks involved that takes customer become defaulter and debt collection process that might make this defaulter recovered. Through estimation…

In this article we consider the parameter risk in the context of internal modelling of the reserve risk under Solvency II. We discuss two opposed perspectives on parameter uncertainty and point out that standard methods of classical…

Several complexity metrics are described which are related to logic structure, data structure and size of spreadsheet models. They primarily concentrate on the dispersion of cell references and cell paths. Most metrics are newly defined,…

In the context of understanding the nature of the risk transformation process of the financial system we propose an iterative risk-trading game between several agents who build their trading strategies based on a general utility setting.…

Methods to correct class imbalance, i.e. imbalance between the frequency of outcome events and non-events, are receiving increasing interest for developing prediction models. We examined the effect of imbalance correction on the performance…

We study a credit risk model which captures effects of economic interactions on a firm's default probability. Economic interactions are represented as a functionally defined graph, and the existence of both cooperative, and competitive,…

Systemic financial risk refers to the simultaneous failure or destabilization of multiple financial institutions, often triggered by contagion mechanisms or common exposures to shocks. In this paper, we present a dynamical model of bank…

There has been a significant amount of research into spreadsheets over the last two decades. Errors in spreadsheets are well documented. Once used mainly for simple functions such as logging, tracking and totalling information, spreadsheets…

Economic models with input-output networks assume that firm or sector (unit) growth is driven by a weighted sum of trade partners' growth and an independently-drawn idiosyncratic shock. I show that the idiosyncratic risk assumption in a…

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…

Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…