Related papers: Dual representations for systemic risk measures
Risk governance is not only about identifying and measuring adverse states of the world. It also asks when an institution is entitled to rely on a risk claim. This paper introduces modal epistemic tools for that second layer of QRM. For a…
Utility and risk are two often competing measurements on the investment success. We show that efficient trade-off between these two measurements for investment portfolios happens, in general, on a convex curve in the two dimensional space…
The structure of the supply chain network has important implications for modelling economic systems, from growth trajectories to responses to shocks or natural disasters. However, reconstructing firm-to-firm networks from available…
Recent empirical and theoretical analyses of several commonly used prediction procedures reveal a peculiar risk behavior in high dimensions, referred to as double/multiple descent, in which the asymptotic risk is a non-monotonic function of…
Risk diversification is the basis of insurance and investment. It is thus crucial to study the effects that could limit it. One of them is the existence of systemic risk that affects all the policies at the same time. We introduce here a…
The interconnectedness of financial institutions affects instability and credit crises. To quantify systemic risk we introduce here the PD model, a dynamic model that combines credit risk techniques with a contagion mechanism on the network…
A risk analyst assesses potential financial losses based on multiple sources of information. Often, the assessment does not only depend on the specification of the loss random variable but also various economic scenarios. Motivated by this…
As impressively shown by the financial crisis in 2007/08, contagion effects in financial networks harbor a great threat for the stability of the entire system. Without sufficient capital requirements for banks and other financial…
By means of the techniques of Boolean valued analysis, we provide a transfer principle between duality theory of classical convex risk measures and duality theory of conditional risk measures. Namely, a conditional risk measure can be…
Risk allocation, the decomposition of a portfolio-wide risk measure into component contributions, is a fundamental problem in financial risk management due to the non-additive nature of risk measures, the layered organizational structures…
As interconnected systems proliferate, safeguarding complex infrastructures against an escalating array of cyber threats has become an urgent challenge. The increasing number of vulnerabilities, combined with resource constraints, makes…
To achieve robustness of risk across different assets, risk parity investing rules, a particular state of risk contributions, have grown in popularity over the previous few decades. To generalize the concept of risk contribution from the…
The global financial crisis of 2007-2009 highlighted the crucial role systemic risk plays in ensuring stability of financial markets. Accurate assessment of systemic risk would enable regulators to introduce suitable policies to mitigate…
The generalization performance of a risk prediction model can be evaluated by its calibration, which measures the agreement between predicted and observed outcomes on external validation data. Here, methods for assessing the calibration of…
As it is known in the finance risk and macroeconomics literature, risk-sharing in large portfolios may increase the probability of creation of default clusters and of systemic risk. We review recent developments on mathematical and…
The main contribution of the paper is to employ the financial market network as a useful tool to improve the portfolio selection process, where nodes indicate securities and edges capture the dependence structure of the system. Three…
The idiosyncratic (microscopic) and systemic (macroscopic) components of market structure have been shown to be responsible for the departure of the optimal mean-variance allocation from the heuristic `equally-weighted' portfolio. In this…
We propose a novel framework of estimating systemic risk measures and risk allocations based on Markov chain Monte Carlo (MCMC) methods. We consider a class of allocations whose jth component can be written as some risk measure of the jth…
New versions of the set-valued average value at risk for multivariate risks are introduced by generalizing the well-known certainty equivalent representation to the set-valued case. The first "regulator" version is independent from any…
The global financial system has become highly connected and complex. Has been proven in practice that existing models, measures and reports of financial risk fail to capture some important systemic dimensions. Only lately, advisory boards…