Related papers: Capital allocation and risk appetite under Solvenc…
A retiree's appetite for risk is a common input into the lifetime utility models that are traditionally used to find optimal strategies for the decumulation of retirement savings. In this work, we consider a retiree with potentially…
Even in the simple one-factor credit portfolio model that underlies the Basel II regulatory capital rules coming into force in 2007, the exact contributions to credit value-at-risk can only be calculated with Monte-Carlo simulation or with…
Distributional reinforcement learning (RL) -- in which agents learn about all the possible long-term consequences of their actions, and not just the expected value -- is of great recent interest. One of the most important affordances of a…
The purpose of the study is to propose a methodology for evaluation and ranking of risky investment projects.An investment certainty equivalence approach dual to the conventional separation of riskless and risky contributions based on cash…
The aim of this study is to develop a method that would enable the company to prioritize the means contributing the most to its performance. The proposed method is based on the profit margin (an economical performance measure of the…
We consider a liquidation problem in which a risk-averse trader tries to liquidate a fixed quantity of an asset in the presence of market impact and random price fluctuations. The trader encounters a trade-off between the transaction costs…
This paper presents an approach to incorporate mortality shocks into mortality projections produced by a stochastic multi-population mortality model. The proposed model combines a decreasing stochastic mortality trend with a…
This paper presents an optimal allocation problem in a financial market with one risk-free and one risky asset, when the market is driven by a stochastic market price of risk. We solve the problem in continuous time, for an investor with a…
Tabular notations, in particular SCR specifications, have proved to be a useful means for formally describing complex requirements. The SCR method offers a powerful family of analysis tools, known as the SCR Toolset, but its availability is…
We propose a reinforcement learning (RL) framework under a broad class of risk objectives, characterized by convex scoring functions. This class covers many common risk measures, such as variance, Expected Shortfall, entropic Value-at-Risk,…
The dependency structure of credit risk parameters is a key driver for capital consumption and receives regulatory and scientific attention. The impact of parameter imperfections on the quality of expected loss (EL) in the sense of a fair,…
Current approaches to fair valuation in insurance often follow a two-step approach, combining quadratic hedging with application of a risk measure on the residual liability, to obtain a cost-of-capital margin. In such approaches, the…
By mid 2004, the Basel Committee on Banking Supervision (BCBS) is epected to launch its final recommendations on minimum capital requirements in the banking industry. Although there is the intention to arrive at capital charges which concur…
The financial crisis showed the importance of measuring, allocating and regulating systemic risk. Recently, the systemic risk measures that can be decomposed into an aggregation function and a scalar measure of risk, received a lot of…
Risk assessment under different possible scenarios is a source of uncertainty that may lead to concerning financial losses. We address this issue, first, by adapting a robust framework to the class of spectral risk measures. Second, we…
Determining contributions by sub-portfolios or single exposures to portfolio-wide economic capital for credit risk is an important risk measurement task. Often economic capital is measured as Value-at-Risk (VaR) of the portfolio loss…
Current contingency reserve criteria ignore the likelihood of individual contingencies and, thus, their impact on system reliability and risk. This paper develops an iterative approach, inspired by the current security-constrained unit…
This article develops a model that takes into account skewness risk in risk parity portfolios. In this framework, asset returns are viewed as stochastic processes with jumps or random variables generated by a Gaussian mixture distribution.…
In a capital adequacy framework, risk measures are used to determine the minimal amount of capital that a financial institution has to raise and invest in a portfolio of pre-specified eligible assets in order to pass a given capital…
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…