Related papers: Option-Based Pricing of Wrong Way Risk for CVA
In decision-making under uncertainty, several criteria have been studied to aggregate the performance of a solution over multiple possible scenarios. This paper introduces a novel variant of ordered weighted averaging (OWA) for optimization…
The classical risk-neutral newsvendor problem is to decide the order quantity that maximises the expected profit. Some recent works have proposed an alternative model, in which the goal is to minimise the conditional value-at-risk (CVaR), a…
We address deterministic resource allocation in point-to-point multi-terminal AWGN channels without inter-terminal interference, with particular focus on optimizing quantile transmission rates for cell-edge terminal service. Classical…
In a wide variety of sequential decision making problems, it can be important to estimate the impact of rare events in order to minimize risk exposure. A popular risk measure is the conditional value-at-risk (CVaR), which is commonly…
In this paper, we focus on finding the optimal hedging strategy of a credit index option using reinforcement learning. We take a practical approach, where the focus is on realism i.e. discrete time, transaction costs; even testing our…
In this work we study the price-hedge issue for general defaultable contracts characterized by the presence of a contingent CSA of switching type. This is a contingent risk mitigation mechanism that allow the counterparties of a defaultable…
In this paper, we argue that, once the costs of maintaining the hedging portfolio are properly taken into account, semi-static portfolios should more properly be thought of as separate classes of derivatives, with non-trivial,…
This study proposes a method of nonresponse assessment based on meta-analytical file-drawer techniques, also known as worst-case resistance testing (WCRT), and suitable for a wide range of data collection scenarios. A general method is…
This article considers the problem of risk-optimal allocation of security measures when the actuators of an uncertain control system are under attack. We consider an adversary injecting false data into the actuator channels. The attack…
Several authors have recently developed risk-sensitive policy gradient methods that augment the standard expected cost minimization problem with a measure of variability in cost. These studies have focused on specific risk-measures, such as…
We use a simple agent based model of value investors in financial markets to test three credit regulation policies. The first is the unregulated case, which only imposes limits on maximum leverage. The second is Basle II and the third is a…
Weighted A* (wA*) is a widely used algorithm for rapidly, but suboptimally, solving planning and search problems. The cost of the solution it produces is guaranteed to be at most W times the optimal solution cost, where W is the weight wA*…
The cryptocurrency market is volatile, non-stationary and non-continuous. Together with liquid derivatives markets, this poses a unique opportunity to study risk management, especially the hedging of options, in a turbulent market. We study…
We consider a class of risk-averse submodular maximization problems (RASM) where the objective is the conditional value-at-risk (CVaR) of a random nondecreasing submodular function at a given risk level. We propose valid inequalities and an…
A promising approach to useful computational quantum advantage is to use variational quantum algorithms for optimisation problems. Crucial for the performance of these algorithms is to ensure that the algorithm converges with high…
We introduce the general arbitrage-free valuation framework for counterparty risk adjustments in presence of bilateral default risk, including default of the investor. We illustrate the symmetry in the valuation and show that the adjustment…
In this paper, we consider the nonconvex minimization problem of the value-at-risk (VaR) that arises from financial risk analysis. By considering this problem as a special linear program with linear complementarity constraints (a bilevel…
We propose a new `hedged' Monte-Carlo (HMC) method to price financial derivatives, which allows to determine simultaneously the optimal hedge. The inclusion of the optimal hedging strategy allows one to reduce the financial risk associated…
The strengthening of capital requirements has induced banks and traders to consider charging a so called capital valuation adjustment (KVA) to the clients in OTC transactions. This roughly corresponds to charge the clients ex-ante the…
Valuation of Credit Valuation Adjustment (CVA) has become an important field as its calculation is required in Basel III, issued in 2010, in the wake of the credit crisis. Exposure, which is defined as the potential future loss of a default…