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Empirical risk minimization (ERM) is typically designed to perform well on the average loss, which can result in estimators that are sensitive to outliers, generalize poorly, or treat subgroups unfairly. While many methods aim to address…

We review the nature of some well-known phenomena such as volatility smiles, convexity adjustments and parallel derivative markets. We propose that the market is incomplete and postulate the existence of intrinsic risks in every contingent…

This paper gives yet another definition of game-theoretic probability in the context of continuous-time idealized financial markets. Without making any probabilistic assumptions (but assuming positive and continuous price paths), we obtain…

We simulate a reputation system in a market to optimise the balance between market security and market equity. We introduce a method of using a reputation system that will stabilise the distribution of wealth in a market in a fair manner.…

Spectral risk measures are attractive risk measures as they allow the user to obtain risk measures that reflect their subjective risk-aversion. This paper examines spectral risk measures based on an exponential utility function, and finds…

In this study, we introduce new estimation methods for the required rate of return of the stochastic dividend discount model (DDM) and the private company valuation model, which will appear below. To estimate the required rate of return, we…

Any optimization algorithm based on the risk parity approach requires the formulation of portfolio total risk in terms of marginal contributions. In this paper we use the independence of the underlying factors in the market to derive the…

This paper investigates market-consistent valuation of insurance liabilities in the context of, for instance, Solvency II and to some extent IFRS 4. We propose an explicit and consistent framework for the valuation of insurance liabilities…

We extract firms' cyber risk with a machine learning algorithm measuring the proximity between their disclosures and a dedicated cyber corpus. Our approach outperforms dictionary methods, uses full disclosure and not devoted-only sections,…

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…

This paper introduces a relative model risk measure of a product priced with a given model, with respect to another reference model for which the market is assumed to be driven. This measure allows comparing products valued with different…

We consider a financial market in which two securities are traded: a stock and an index. Their prices are assumed to satisfy the Black-Scholes model. Besides assuming that the index is a tradable security, we also assume that it is…

This paper examines the empirical failure of uncovered interest parity (UIP) and proposes a structural explanation based on a mean-reverting risk premium. We define a realized premium as the deviation between observed exchange rate returns…

Traditional machine learning methods have been widely studied in financial innovation. My study focuses on the application of deep learning methods on asset pricing. I investigate various deep learning methods for asset pricing, especially…

This paper introduces a new type of risk measures, namely regime switching entropic risk measures, and study their applicability through simulations. The state of the economy is incorporated into the entropic risk formulation by using a…

Enterprise financial risk analysis aims at predicting the future financial risk of enterprises. Due to its wide and significant application, enterprise financial risk analysis has always been the core research topic in the fields of Finance…

In general, underestimation of risk is something which should be avoided as far as possible. Especially in financial asset management, equity risk is typically characterized by the measure of portfolio variance, or indirectly by quantities…

Enterprise Resource Planning ERP systems integrate information across an entire organization that automate core activities such as finance accounting, human resources, manufacturing, production and supply chain management etc. to facilitate…

This letter uses the Block Maxima Extreme Value approach to quantify catastrophic risk in international equity markets. Risk measures are generated from a set threshold of the distribution of returns that avoids the pitfall of using…

This paper considers the problem of measuring the credit risk in portfolios of loans, bonds, and other instruments subject to possible default under multi-factor models. Due to the amount of the portfolio, the heterogeneous effect of…