Related papers: Visualizing Treasury Issuance Strategy
In this note we sketch an initial tentative approach to funding costs analysis and management for contracts with bilateral counterparty risk in a simplified setting. We depart from the existing literature by analyzing the issue of funding…
We study U.S. Treasury yield curve forecasting under distributional uncertainty and recast forecasting as an operations research and managerial decision problem. Rather than minimizing average forecast error, the forecaster selects a…
Modern portfolio theory(MPT) addresses the problem of determining the optimum allocation of investment resources among a set of candidate assets. In the original mean-variance approach of Markowitz, volatility is taken as a proxy for risk,…
This study emphasizes how crucial it is to visualize machine learning models, especially for the banking industry, in order to improve interpretability and support predictions in high stakes financial settings. Visual tools enable…
Recent policy optimization approaches (Schulman et al., 2015a; 2017) have achieved substantial empirical successes by constructing new proxy optimization objectives. These proxy objectives allow stable and low variance policy learning, but…
This study delves into the intricate realm of risk evaluation within the domain of specific financial derivatives, notably options. Unlike other financial instruments, like bonds, options are susceptible to broader risks. A distinctive…
This survey gives an introduction to monetary measures of risk as monotone and cash additive functions on spaces of univariate random variables. Primal and dual representation results as well as several examples are discussed. Principal…
Funding is a cost to trading desks that they see as an input. Current FVA-related literature reflects this by also taking funding costs as an input, usually constant, and always risk-neutral. However, this funding curve is the output from a…
Wrong-Way Risk (WWR) is an important component in Funding Valuation Adjustment (FVA) modelling. Yet, the standard assumption is independence between market risks and the counterparty defaults and funding costs. This typical industrial…
Systemic risk refers to the risk that the financial system is susceptible to failures due to the characteristics of the system itself. The tremendous cost of systemic risk requires the design and implementation of tools for the efficient…
Bond rating Transition Probability Matrices (TPMs) are built over a one-year time-frame and for many practical purposes, like the assessment of risk in portfolios or the computation of banking Capital Requirements (e.g. the new IFRS 9…
We explore credit risk pricing by modeling equity as a call option and debt as the difference between the firm's asset value and a put option, following the structural framework of the Merton model. Our approach proceeds in two stages:…
In risk management it is desirable to grasp the essential statistical features of a time series representing a risk factor. This tutorial aims to introduce a number of different stochastic processes that can help in grasping the essential…
Conditional forecasts of risk measures play an important role in internal risk management of financial institutions as well as in regulatory capital calculations. In order to assess forecasting performance of a risk measurement procedure,…
This article is focused on using a new measurement of risk-- Weighted Value at Risk to develop a new method of constructing initiate from the TVAR solving problem, based on MATLAB software, using the historical simulation method (avoiding…
We develop a general theory of risk measures that determines the optimal amount of capital to raise and invest in a portfolio of reference traded securities in order to meet a pre-specified regulatory requirement. The distinguishing feature…
We characterize optimal monetary policy when policy endogenously moves risk premia through redistribution across agents who differ in their willingness to bear risk. The analytical core is Marginal Risk Capacity, the covariance of monetary…
As part of Basel II's incremental risk charge (IRC) methodology, this paper summarizes our extensive investigations of constructing transition probability matrices (TPMs) for unsecuritized credit products in the trading book. The objective…
In many randomized experiments, the treatment effect of the long-term metric (i.e. the primary outcome of interest) is often difficult or infeasible to measure. Such long-term metrics are often slow to react to changes and sufficiently…
This article develops the theory of risk budgeting portfolios, when we would like to impose weight constraints. It appears that the mathematical problem is more complex than the traditional risk budgeting problem. The formulation of the…