Related papers: Visualizing Treasury Issuance Strategy
We build the time series of optimal realized portfolio weights from high-frequency data and we suggest a novel Dynamic Conditional Weights (DCW) model for their dynamics. DCW is benchmarked against popular model-based and model-free…
In this paper, we generalize the parametric delta-VaR method from portfolios with normally distributed risk factors to portfolios with elliptically distributed ones. We treat both the expected shortfall and the Value-at-Risk of such…
Wrong-way risk in counterparty and funding exposures is most dramatic in the situations of systemic crises and tails events. A consistent model of wrong-way risk (WWR) is developed here with the probability-weighted addition of tail events…
We consider calculation of capital requirements when the underlying economic scenarios are determined by simulatable risk factors. In the respective nested simulation framework, the goal is to estimate portfolio tail risk, quantified via…
Approximate Incremental Value-at-Risk formulae provide an easy-to-use preliminary guideline for risk allocation. Both the cases of risk adding and risk pooling are examined and beta-based formulae achieved. Results highlight how much the…
Model risk measures consequences of choosing a model in a class of possible alternatives. We find analytical and simulated bounds for payoff functions on classes of plausible alternatives of a given discrete model. We measure the impact of…
Evaluation of systemic risk in networks of financial institutions in general requires information of inter-institution financial exposures. In the framework of Debt Rank algorithm, we introduce an approximate method of systemic risk…
In this paper we introduce a simple continuous-time asset pricing framework, based on general multi-dimensional diffusion processes, that combines semi-analytic pricing with a nonlinear specification for the market price of risk. Our…
This paper is mainly a survey of recent research developments regarding methods for risk minimization in financial markets modeled by It\^o-L\'evy processes, but it also contains some new results on the underlying stochastic maximum…
Rate change calculations in the literature involve deterministic methods that measure the change in premium for a given policy. The definition of rate change as a statistical parameter is proposed to address the stochastic nature of the…
Portfolio optimization methods have evolved significantly since Markowitz introduced the mean-variance framework in 1952. While the theoretical appeal of this approach is undeniable, its practical implementation poses important challenges,…
Inflation exhibits state-dependent, skewed, and fat-tailed dynamics that make risk a central concern for monetary policy. Accordingly, inflation risks are distributional and cannot be fully captured by mean-based models. We propose a…
A key driver of Credit Value Adjustment (CVA) is the possible dependency between exposure and counterparty credit risk, known as Wrong-Way Risk (WWR). At this time, addressing WWR in a both sound and tractable way remains challenging:…
The concept of technical debt has been explored from many perspectives but its precise estimation is still under heavy empirical and experimental inquiry. We aim to understand whether, by harnessing approximate, data-driven,…
This paper describes the dependence of market-based statistical moments of returns on statistical moments and correlations of the current and past trade values. We use Markowitz's definition of value weighted return of a portfolio as the…
Multi-period measures of risk account for the path that the value of an investment portfolio takes. In the context of probabilistic risk measures, the focus has traditionally been on the magnitude of investment loss and not on the dimension…
Systemic risk is a rapidly developing area of research. Classical financial models often do not adequately reflect the phenomena of bubbles, crises, and transitions between them during credit cycles. To study very improbable events,…
We study risk-aware linear policy approximations for the optimal operation of an energy system with stochastic wind power, storage, and limited fuel. The resulting problem is a sequential decision-making problem with rolling forecasts. In…
Assessing the contribution of various risk factors to future inflation risks was crucial for guiding monetary policy during the recent high inflation period. However, existing methodologies often provide limited insights by focusing solely…
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…