Related papers: Regulator-based risk statistics for portfolios
Portfolio diversification, traditionally measured through asset correlations and volatilitybased metrics, is fundamental to managing financial risk. However, existing diversification metrics often overlook non-numerical relationships…
We consider the problem of governing systemic risk in a banking system model. The banking system model consists in an initial value problem for a system of stochastic differential equations whose dependent variables are the log-monetary…
This paper focuses on stochastic orders and its applications : policy limits and deductibles. Further, many applications and some examples are given : comparison of two families of copulas, individual and collective risk model, reinsurance…
We analyze characteristics' joint predictive information through the lens of out-of-sample power utility functions. Linking weights to characteristics to form optimal portfolios suffers from estimation error which we mitigate by maximizing…
Risk assessment under different possible scenarios is a source of uncertainty that may lead to concerning financial losses. We address this issue, first, by adapting a robust framework to the class of spectral risk measures. Second, we…
We investigate to which extent the relevant features of (static) Systemic Risk Measures can be extended to a conditional setting. After providing a general dual representation result, we analyze in greater detail Conditional Shortfall…
The quantification of diversification benefits due to risk aggregation plays a prominent role in the (regulatory) capital management of large firms within the financial industry. However, the complexity of today's risk landscape makes a…
Considerable interest has recently been focused on studying multiple phenotypes simultaneously in both epidemiological and genomic studies, either to capture the multidimensionality of complex disorders or to understand shared etiology of…
The article proposes a method of designing a statistically distinguishable rating scale that is not excessive in relation to the existing observation statistics. This allows for more stable validation with a fixed maximum number of…
We analyze the performance of RiskMetrics, a widely used methodology for measuring market risk. Based on the assumption of normally distributed returns, the RiskMetrics model completely ignores the presence of fat tails in the distribution…
Credit capital requirements in Internal Rating Based approaches require the calibration of two key parameters: the probability of default and the loss-given-default. This letter considers the uncertainty about these two parameters and…
We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump--diffusion process for the risk factors, i.e. for the company assets. We also include correlations…
Hazard ratios are often used to evaluate time to event outcomes, but they may be hard to interpret. A particular issue arise because hazards are typically estimated conditional on survival, i.e.\ on left truncated samples. Then, hazard…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…
Regulatory stress tests have become one of the main tools for setting capital requirements at the largest U.S. banks. The Federal Reserve uses confidential models to evaluate bank-specific outcomes for bank-specific portfolios in shared…
We consider the problem of the statistical uncertainty of the correlation matrix in the optimization of a financial portfolio. We show that the use of clustering algorithms can improve the reliability of the portfolio in terms of the ratio…
Stochastic dominance is a crucial tool for the analysis of choice under risk. It is typically analyzed as a property of two gambles that are taken in isolation. We study how additional independent sources of risk (e.g. uninsurable labor…
Risk control and optimal diversification constitute a major focus in the finance and insurance industries as well as, more or less consciously, in our everyday life. We present a discussion of the characterization of risks and of the…
The present paper provides a study of high-dimensional statistical arbitrage that combines factor models with the tools from stochastic control, obtaining closed-form optimal strategies which are both interpretable and computationally…
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…