Related papers: Asset correlation estimation for inhomogeneous exp…

We consider a large collection of dynamically interacting components defined on a weighted directed graph determining the impact of default of one component to another one. We prove a law of large numbers for the empirical measure capturing…

Discrete time hedging in a complete diffusion market is considered. The hedge portfolio is rebalanced when the absolute difference between delta of the hedge portfolio and the derivative contract reaches a threshold level. The rate of…

Population-wide screening is a powerful tool for controlling infectious diseases. Group testing enables such screening despite limited resources. Viral concentration of pooled samples are often positively correlated, either because…

A standard quantitative method to access credit risk employs a factor model based on joint multivariate normal distribution properties. By extending a one-factor Gaussian copula model to make a more accurate default forecast, this paper…

In normal times, it is assumed that financial institutions operating in non-overlapping sectors have complementary and distinct outcomes, typically reflected in mostly uncorrelated outcomes and asset returns. Such is the reasoning behind…

This paper introduces a novel approach for estimating heterogeneous treatment effects of binary treatment in panel data, particularly focusing on short panel data with large cross-sectional data and observed confoundings. In contrast to…

With the widespread application of machine learning in financial risk management, conventional wisdom suggests that longer training periods and more feature variables contribute to improved model performance. This paper, focusing on…

We present a statistical test that can be used to verify supervisory requirements concerning overlapping time windows for the long-term calibration in rating systems. In a first step, we show that the long-run default rate is approximately…

Exposure measurement error is a ubiquitous but often overlooked challenge in causal inference with observational data. Existing methods accounting for exposure measurement error largely rely on restrictive parametric assumptions, while…

Hedge funds have long been viewed as a veritable "black box" of investing since outsiders may never view the exact composition of portfolio holdings. Therefore, the ability to estimate an informative set of asset weights is highly desirable…

Risk-averse investors often wish to exclude stocks from their portfolios that bear high credit risk, which is a measure of a firm's likelihood of bankruptcy. This risk is commonly estimated by constructing signals from quarterly accounting…

In this paper we present a novel approach for firm default probability estimation. The methodology is based on multivariate contingent claim analysis and pair copula constructions. For each considered firm, balance sheet data are used to…

We present a method to compensate statistical errors in the calculation of correlations on asynchronous time series. The method is based on the assumption of an underlying time series. We set up a model and apply it to financial data to…

A method to estimate the time-dependent correlation via an empirical bias estimate of the time-delayed mutual information for a time-series is proposed. In particular, the bias of the time-delayed mutual information is shown to often be…

Quantile regression is a powerful tool for detecting exposure-outcome associations given covariates across different parts of the outcome's distribution, but has two major limitations when the aim is to infer the effect of an exposure.…

Pooling heterogeneous datasets across domains is a common strategy in representation learning, but naive pooling can amplify distributional asymmetries and yield biased estimators, especially in settings where zero-shot generalization is…

The global balance is a well-known indicator of the behavior of a signed network. Recent literature has introduced the concept of local balance as a measure of the contribution of a single node to the overall balance of the network. In the…

The instability of the financial system as experienced in recent years and in previous periods is often linked to credit defaults, i.e., to the failure of obligors to make promised payments. Given the large number of credit contracts, this…

We consider the setting of an aggregate data meta-analysis of a continuous outcome of interest. When the distribution of the outcome is skewed, it is often the case that some primary studies report the sample mean and standard deviation of…

The authors examine the concept of probability of default for asset-backed loans. In contrast to unsecured loans it is shown that probability of default can be defined as either a measure of the likelihood of the borrower failing to make…