Related papers: Dual representations for systemic risk measures
The fragility of financial systems was starkly demonstrated in early 2023 through a cascade of major bank failures in the United States, including the second, third, and fourth largest collapses in the US history. The highly interdependent…
The family of admissible positions in a transaction costs model is a random closed set, which is convex in case of proportional transaction costs. However, the convexity fails, e.g. in case of fixed transaction costs or when only a finite…
Systemic risk measures play a crucial role in analyzing individual losses conditional on extreme system-wide disasters. In this paper, we provide a unified asymptotic treatment for systemic risk measures. First, we classify them into two…
Complex non-linear interactions between banks and assets we model by two time-dependent Erd\H{o}s Renyi network models where each node, representing bank, can invest either to a single asset (model I) or multiple assets (model II). We use…
Safety critical systems are typically subjected to hazard analysis before commissioning to identify and analyse potentially hazardous system states that may arise during operation. Currently, hazard analysis is mainly based on human…
In an environment of increasingly volatile financial markets, the accurate estimation of risk remains a major challenge. Traditional econometric models, such as GARCH and its variants, are based on assumptions that are often too rigid to…
This paper develops a formal critique of scalar fiscal aggregation in the IS LM BP/Mundell Fleming framework. It shows that when fiscal policy is composed of heterogeneous instruments current purchases, public investment and transfers to…
Randomness in financial markets requires modern and robust multivariate models of risk measures. This paper proposes a new approach for modeling multivariate risk measures under Wasserstein barycenters of probability measures supported on…
The Basel II internal ratings-based (IRB) approach to capital adequacy for credit risk plays an important role in protecting the Australian banking sector against insolvency. We outline the mathematical foundations of regulatory capital for…
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…
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…
The aim of this paper is to provide several examples of convex risk measures necessary for the application of the general framework for portfolio theory of Maier-Paape and Zhu, presented in Part I of this series (arXiv:1710.04579…
We propose a stochastic model allowing property and casualty insurers with multiple business lines to measure their liabilities for incurred claims risk and calculate associated capital requirements. Our model includes many desirable…
The multivariate conditional probability distribution models the effects of a set of variables onto the statistical properties of another set of variables. In the study of systemic risk in a financial system, the multivariate conditional…
Following several episodes of financial market turmoil in recent decades, changes in systemic risk have drawn growing attention. Therefore, we propose surveillance schemes for systemic risk, which allow to detect misspecified systemic risk…
This work proposes a unified framework for portfolio allocation, covering both asset selection and optimization, based on a multiple-hypothesis predict-then-optimize approach. The portfolio is modeled as a structured ensemble, where each…
We consider the problem of governing systemic risk in a banking system model. The banking system model consists in an initial value problem for a system of stochastic differential equations whose dependent variables are the log-monetary…
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 order to figure out and to forecast the emergence phenomena of social systems, we propose several probabilistic models for the analysis of financial markets, especially around a crisis. We first attempt to visualize the collective…
Financial institutions are currently required to meet more stringent capital requirements than they were before the recent financial crisis; in particular, the capital requirement for a large bank's trading book under the Basel 2.5 Accord…