Related papers: Multivariate Shortfall Risk Allocation and Systemi…
The paper discusses capital allocation using the Euler formula and focuses on the risk measures Value-at-Risk (VaR) and Expected shortfall (ES). Some new results connected to this capital allocation is known. Two examples illustrate that…
When simulating a complex stochastic system, the behavior of output response depends on input parameters estimated from finite real-world data, and the finiteness of data brings input uncertainty into the system. The quantification of the…
We propose a computational framework to quantify (measure) and to optimize the reliability of complex systems. The approach uses a graph representation of the system that is subject to random failures of its components (nodes and edges).…
A risk measure that is consistent with the second-order stochastic dominance and additive for sums of independent random variables can be represented as a weighted entropic risk measure (WERM). The expected utility maximization problem with…
This paper addresses allocation methodologies for a risk measure inherited from ruin theory. Specifically, we consider a dynamic value-at-risk (VaR) measure defined as the smallest initial capital needed to ensure that the ultimate ruin…
We extend the Vasi\v{c}ek loan portfolio model to a setting where liabilities fluctuate randomly and asset values may be subject to systemic jump risk. We derive the probability distribution of the percentage loss of a uniform portfolio and…
Starting from the requirement that risk measures of financial portfolios should be based on their losses, not their gains, we define the notion of loss-based risk measure and study the properties of this class of risk measures. We…
Risk scores are simple classification models that let users make quick risk predictions by adding and subtracting a few small numbers. These models are widely used in medicine and criminal justice, but are difficult to learn from data…
We provide an overview of the relationship between financial networks and systemic risk. We present a taxonomy of different types of systemic risk, differentiating between direct externalities between financial organizations (e.g.,…
Sequential portfolio selection has attracted increasing interests in the machine learning and quantitative finance communities in recent years. As a mathematical framework for reinforcement learning policies, the stochastic multi-armed…
The inability to see and quantify systemic financial risk comes at an immense social cost. Systemic risk in the financial system arises to a large extent as a consequence of the interconnectedness of its institutions, which are linked…
We study the difference between the level of systemic risk that is empirically measured on an interbank network and the risk that can be deduced from the balance sheets composition of the participating banks. Using generalised DebtRank…
Risk measures for random vectors have been considered in multi-asset markets with transaction costs and financial networks in the literature. While the theory of set-valued risk measures provide an axiomatic framework for assigning to a…
Financial markets are exposed to systemic risk, the risk that a substantial fraction of the system ceases to function and collapses. Systemic risk can propagate through different mechanisms and channels of contagion. One important form of…
Much research in systemic risk is focused on default contagion. While this demands an understanding of valuation, fewer articles specifically deal with the existence, the uniqueness, and the computation of equilibrium prices in structural…
This paper investigates how to measure common market risk factors using newly proposed Panel Quantile Regression Model for Returns. By exploring the fact that volatility crosses all quantiles of the return distribution and using penalized…
The inf-convolution of risk measures is directly related to risk sharing and general equilibrium, and it has attracted considerable attention in mathematical finance and insurance problems. However, the theory is restricted to finite sets…
We propose a robust risk measurement approach that minimizes the expectation of overestimation plus underestimation costs. We consider uncertainty by taking the supremum over a collection of probability measures, relating our approach to…
Despite decades of research in risk management, most of the literature has focused on scalar risk measures (like e.g. Value-at-Risk and Expected Shortfall). While such scalar measures provide compact and tractable summaries, they provide a…
We present an analytical model to study the role of expectation feedbacks and overlapping portfolios on systemic stability of financial systems. Building on [Corsi et al., 2016], we model a set of financial institutions having Value at Risk…