Related papers: Multiple risk factor dependence structures: Distri…
Copulas have become an important tool in the modern best practice Enterprise Risk Management, often supplanting other approaches to modelling stochastic dependence. However, choosing the `right' copula is not an easy task, and the…
This paper presents a focused review of Markov random fields (MRFs)--commonly used probabilistic representations of spatial dependence in discrete spatial domains--for categorical data, with an emphasis on models for binary-valued…
Individual risk models need to capture possible correlations as failing to do so typically results in an underestimation of extreme quantiles of the aggregate loss. Such dependence modelling is particularly important for managing credit…
The current research on credit risk is primarily focused on modeling default probabilities. Recovery rates are often treated as an afterthought; they are modeled independently, in many cases they are even assumed constant. This is despite…
Distributionally robust optimization involves various probability measures in its problem formulation. They can be bundled to constitute a risk functional. For this equivalence, risk functionals constitute a fundamental building block in…
In this paper, we introduce a risk process, namely, the mixed fractional risk process (MFRP) in which the number of claims in the associated claim process are modelled using the mixed fractional Poisson process (MFPP). The covariance…
A new multivariate distribution possessing arbitrarily parametrized and positively dependent univariate Pareto margins is introduced. Unlike the probability law of Asimit et al. (2010) [Asimit, V., Furman, E. and Vernic, R. (2010) On a…
We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump--diffusion process for the risk factors, i.e. for the company assets. We also include correlations…
We present a class of flexible and tractable static factor models for the term structure of joint default probabilities, the factor copula models. These high-dimensional models remain parsimonious with pair-copula constructions, and nest…
We propose a dynamic model of dependence structure between financial institutions within a financial system and we construct measures for dependence and financial instability. Employing Markov structures of joint credit migrations, our…
We introduce a novel class of graphical models, termed profile graphical models, that represent, within a single graph, how an external factor influences the dependence structure of a multivariate set of variables. This class is quite…
Estimating the covariance of asset returns, i.e., the risk model, is a key component of financial portfolio construction and evaluation. Most risk modeling approaches produce a factor model that decomposes the asset variability into two…
We extend the construction principle of multivariate phase-type distributions to establish an analytically tractable class of heavy-tailed multivariate random variables whose marginal distributions are of Mittag-Leffler type with arbitrary…
In this paper we obtain closed expressions for the probability distribution function, when we consider aggregated risks with multivariate dependent Pareto distributions. We work with the dependent multivariate Pareto type II proposed by…
In many insurance contexts, dependence between risks of a portfolio may arise from their frequencies. We investigate a dependent risk model in which we assume the vector of count variables to be a tree-structured Markov random field with…
Income and risk coexist, yet investors are often so focused on chasing high returns that they overlook the potential risks that can lead to high losses. Therefore, risk forecasting and risk control is the cornerstone of investment. To…
Understanding variable dependence, particularly eliciting their statistical properties given a set of covariates, provides the mathematical foundation in practical operations management such as risk analysis and decision-making given…
We give a complete algorithm and source code for constructing general multifactor risk models (for equities) via any combination of style factors, principal components (betas) and/or industry factors. For short horizons we employ the…
The distribution of the sum of dependent risks is a crucial aspect in actuarial sciences, risk management and in many branches of applied probability. In this paper, we obtain analytic expressions for the probability density function (pdf)…
The aim of this article is to analyze data from multiple repairable systems under the presence of dependent competing risks. In order to model this dependence structure, we adopted the well-known shared frailty model. This model provides a…