Related papers: Visualizing Treasury Issuance Strategy
In this three-part series of papers, we argue that the conventional spread measures are not well defined for credit-risky bonds and introduce a set of credit term structures which correct for the biases associated with the strippable cash…
This paper quantifies the effects of equity tail risk on the US government bond market. We estimate equity tail risk with option-implied stock market volatility that stems from large negative price jumps, and we assess its value in…
The family of admissible positions in a transaction costs model is a random closed set, which is convex in case of proportional transaction costs. However, the convexity fails, e.g. in case of fixed transaction costs or when only a finite…
In recent years, the economic policy of privatization, which is defined as the transfer of property or responsibility from public sector to private sector, is one of the global phenomenon that increases use of markets to allocate resources.…
The purpose of this paper is to utilize statistical methodologies to infer from market prices of assets and their derivatives the magnitude of the set of a measure M that defines acceptance sets of risky future cash flows. Specifically, we…
Procyclicality of historical risk measure estimation means that one tends to over-estimate future risk when present realized volatility is high and vice versa under-estimate future risk when the realized volatility is low. Out of it…
Technical debt is a metaphor used to convey the idea that doing things in a "quick and dirty" way when designing and constructing a software leads to a situation where one incurs more and more deferred future expenses. Similarly to…
Starting from the requirement that risk measures of financial portfolios should be based on their losses, not their gains, we define the notion of loss-based risk measure and study the properties of this class of risk measures. We…
Portfolio optimization has long been dominated by covariance-based strategies, such as the Markowitz Mean-Variance framework. However, these approaches often fail to ensure a balanced risk structure across assets, leading to concentration…
This paper investigates risk measures derived from the expected maximum deficit in a continuous-time framework and develops optimal reserve allocation strategies across multiple lines of business. We formalize the expected maximum deficit…
We propose a unifying framework for the pricing of debt securities under general time-inhomogeneous short-rate diffusion processes. The pricing of bonds, bond options, callable/putable bonds, and convertible bonds (CBs) is covered. Using…
In this paper, we study the problem of designing proxies (or portfolios) for various stock market indices based on historical data. We use four different methods for computing market indices, all of which are formulas used in actual stock…
We propose a new approach, termed Realized Risk Measures (RRM), to estimate Value-at-Risk (VaR) and Expected Shortfall (ES) using high-frequency financial data. It extends the Realized Quantile (RQ) approach proposed by Dimitriadis and…
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…
Much research in systemic risk is focused on default contagion. While this demands an understanding of valuation, fewer articles specifically deal with the existence, the uniqueness, and the computation of equilibrium prices in structural…
Forecasting project expenses is a crucial step for businesses to avoid budget overruns and project failures. Traditionally, this has been done by financial analysts or data science techniques such as time-series analysis. However, these…
We review recent progress in modeling credit risk for correlated assets. We start from the Merton model which default events and losses are derived from the asset values at maturity. To estimate the time development of the asset values, the…
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…
Debt recycling is an aggressive equity extraction strategy that potentially permits faster repayment of a mortgage. While equity progressively builds up as the mortgage is repaid monthly, mortgage holders may obtain another loan they could…
We introduce a neural network approach for assessing the risk of a portfolio of assets and liabilities over a given time period. This requires a conditional valuation of the portfolio given the state of the world at a later time, a problem…