Related papers: Concurrent Credit Portfolio Losses
We construct Zero-Coupon Bond markets driven by a cylindrical Brownian motion in which the notion of generalized portfolio has important flaws: There exist bounded smooth random variables with generalized hedging portfolios for which the…
Quantifying tail dependence is an important issue in insurance and risk management. The prevalent tail dependence coefficient (TDC), however, is known to underestimate the degree of tail dependence and it does not capture non-exchangeable…
Common asset holding by financial institutions, namely portfolio overlap, is nowadays regarded as an important channel for financial contagion with the potential to trigger fire sales and thus severe losses at the systemic level. In this…
This paper considers the constrained portfolio optimization in a generalized life-cycle model. The individual with a stochastic income manages a portfolio consisting of stocks, a bond, and life insurance to maximize his or her consumption…
We analyze characteristics' joint predictive information through the lens of out-of-sample power utility functions. Linking weights to characteristics to form optimal portfolios suffers from estimation error which we mitigate by maximizing…
We study the dependence structure of market states by estimating empirical pairwise copulas of daily stock returns. We consider both original returns, which exhibit time-varying trends and volatilities, as well as locally normalized ones,…
We systematically study and compare damage spreading for random Boolean and threshold networks under small external perturbations (damage), a problem which is relevant to many biological networks. We identify a new characteristic…
A simple banking network model is proposed which features multiple waves of bank defaults and is analytically solvable in the limiting case of an infinitely large homogeneous network. The model is a collection of nodes representing…
A clearing member of a Central Counterparty (CCP) is exposed to losses on their default fund and initial margin contributions. Such losses can be incurred whenever the CCP has insufficient funds to unwind the portfolio of a defaulting…
In this paper, we compute multivariate tail risk probabilities where the marginal risks are heavy-tailed and the dependence structure is a Gaussian copula. The marginal heavy-tailed risks are modeled using regular variation which leads to a…
The subject of the present article is the study of correlations between large insurance companies and their contribution to systemic risk in the insurance sector. Our main goal is to analyze the conditional structure of the correlation on…
Based on supermodularity ordering properties, we show that convex risk measures of credit losses are nondecreasing w.r.t. credit-credit and, in a wrong-way risk setup, credit-market, covariances of elliptically distributed latent factors.…
Given multivariate time series, we study the problem of forming portfolios with maximum mean reversion while constraining the number of assets in these portfolios. We show that it can be formulated as a sparse canonical correlation analysis…
We consider the problem of option hedging in a market with proportional transaction costs. Since super-replication is very costly in such markets, we replace perfect hedging with an expected loss constraint. Asymptotic analysis for small…
In this paper we provide evidence that financial option markets for equity indices give rise to non-trivial dependency structures between its constituents. Thus, if the individual constituent distributions of an equity index are inferred…
This paper investigates the problem of ensembling multiple strategies for sequential portfolios to outperform individual strategies in terms of long-term wealth. Due to the uncertainty of strategies' performances in the future market, which…
We consider a portfolio optimisation problem for a utility-maximising investor who faces convex constraints on his portfolio allocation in Heston's stochastic volatility model. We apply the duality methods developed in previous work to…
We study cascades on a two-layer multiplex network, with asymmetric feedback that depends on the coupling strength between the layers. Based on an analytical branching process approximation, we calculate the systemic risk measured by the…
Instance-wise feature selection and ranking methods can achieve a good selection of task-friendly features for each sample in the context of neural networks. However, existing approaches that assume feature subsets to be independent are…
Gaussian copulas are widely used in the industry to correlate two random variables when there is no prior knowledge about the co-dependence between them. The perturbed Gaussian copula approach allows introducing the skew information of both…