Related papers: Revising SA-CCR
This paper studies the problem of optimal investment with CRRA (constant, relative risk aversion) preferences, subject to dynamic risk constraints on trading strategies. The market model considered is continuous in time and incomplete. the…
In this note, we will get the estimate of the expected distribution of critical values of Gaussian SU(2) random polynomials as the degree large enough. The result is a direct application of the Kac-Rice formula. The critical values will…
Critical behaviour of a fluid, subjected to strongly anisotropic turbulent mixing, is studied by means of the field theoretic renormalization group. As a simplified model, relaxational stochastic dynamics of a non-conserved scalar order…
This paper proposes a safety analysis method that facilitates a tunable balance between the worst-case and risk-neutral perspectives. First, we define a risk-sensitive safe set to specify the degree of safety attained by a stochastic…
The random sequential adsorption (RSA) model is modified to describe damage and crack accumulation. The exclusion for object deposition (for damaged region formation) is not for the whole object, as in the standard RSA, but only for the…
Estimating and assessing the risk of a large portfolio is an important topic in financial econometrics and risk management. The risk is often estimated by a substitution of a good estimator of the volatility matrix. However, the accuracy of…
In the aftermath of the 2007 global financial crisis, banks started reflecting into derivative pricing the cost of capital and collateral funding through XVA metrics. Here XVA is a catch-all acronym whereby X is replaced by a letter such as…
Reliability updating refers to a problem that integrates Bayesian updating technique with structural reliability analysis and cannot be directly solved by structural reliability methods (SRMs) when it involves equality information. The…
The introduction of CCPs in most derivative transactions will dramatically change the landscape of derivatives pricing, hedging and risk management, and, according to the TABB group, will lead to an overall liquidity impact about 2 USD…
Factor modeling of asset returns has been a dominant practice in investment science since the introduction of the Capital Asset Pricing Model (CAPM) and the Arbitrage Pricing Theory (APT). The factors, which account for the systematic risk,…
It has become standard for empirical studies to conduct inference robust to cluster dependence and heterogeneity. With a small number of clusters, the normal approximation for the $t$-statistics of regression coefficients may be poor. This…
This paper investigates the large-time asymptotic behavior of the sensitivities of cash flows. In quantitative finance, the price of a cash flow is expressed in terms of a pricing operator of a Markov diffusion process. We study the extent…
Solvency II Directive 2009/138/EC requires an insurance and reinsurance undertakings assessment of a Solvency Capital Requirement by means of the so-called "Standard Formula" or by means of partial or full internal models. Focusing on the…
In recent years, multi-factor strategies have gained increasing popularity in the financial industry, as they allow investors to have a better understanding of the risk drivers underlying their portfolios. Moreover, such strategies promise…
We propose an enhancement to wholesale electricity markets whereby the exposure of consumers to increasingly large and volatile consumer payments arising as a byproduct of volatile real-time net loads -- i.e., loads minus renewable outputs…
We compute three-loop corrections to the singlet form factors for massive quarks using a semi-analytic method which provides precise results over the whole kinematic range. Particular emphasis is put on the anomaly contribution originating…
The value-at-risk of a delta-gamma approximated derivatives portfolio can be computed by numerical integration of the characteristic function. However, while the choice of parameters in any numerical integration scheme is paramount, in…
In this work we rigorously establish mathematical models to obtain the capital valuation adjustment (KVA) as part of the total valuation adjustments (XVAs). For this purpose, we use a semi-replication strategy based on market theory. We…
In a series of recent papers, Damiano Brigo, Andrea Pallavicini, and co-authors have shown that the value of a contract in a Credit Valuation Adjustment (CVA) setting, being the sum of the cash flows, can be represented as a solution of a…
Credit (CVA), Debit (DVA) and Funding Valuation Adjustments (FVA) are now familiar valuation adjustments made to the value of a portfolio of derivatives to account for credit risks and funding costs. However, recent changes in the…