Related papers: Regulator-based risk statistics for portfolios
Analytical, free of time consuming Monte Carlo simulations, framework for credit portfolio systematic risk metrics calculations is presented. Techniques are described that allow calculation of portfolio-level systematic risk measures…
We examine whether and how granular, real-time predictive models should be integrated into central banks' macroprudential toolkit. First, we develop a tractable framework that formalizes the tradeoff regulators face when choosing between…
Risk stratification is most directly and informatively summarized as a risk distribution curve. From this curve the ROC curve, predictiveness curve, and other curves depicting risk stratification can be derived, demonstrating that they…
Understanding variable dependence, particularly eliciting their statistical properties given a set of covariates, provides the mathematical foundation in practical operations management such as risk analysis and decision-making given…
Financial correlations play a central role in financial theory and also in many practical applications. From theoretical point of view, the key interest is in a proper description of the structure and dynamics of correlations. From…
In order to estimate the conditional risk of a portfolio's return, two strategies can be advocated. A multivariate strategy requires estimating a dynamic model for the vector of risk factors, which is often challenging, when at all…
"What are the origins of risks?" and "How material are they?" -- these are the two most fundamental questions of any risk analysis. Quantitative Structuring -- a technology for building financial products -- provides economically meaningful…
Sharpe ratio (sometimes also referred to as information ratio) is widely used in asset management to compare and benchmark funds and asset managers. It computes the ratio of the (excess) net return over the strategy standard deviation.…
We introduce diversified risk parity embedded with various reward-risk measures and more generic allocation rules for portfolio construction. We empirically test the proposed reward-risk parity strategies and compare their performance with…
The paper concerns primal and dual representations as well as time consistency of set-valued dynamic risk measures. Set-valued risk measures appear naturally when markets with transaction costs are considered and capital requirements can be…
Lack of reliability is a well-known issue for reinforcement learning (RL) algorithms. This problem has gained increasing attention in recent years, and efforts to improve it have grown substantially. To aid RL researchers and production…
We model systemic risk using a common factor that accounts for market-wide shocks and a tail dependence factor that accounts for linkages among extreme stock returns. Specifically, our theoretical model allows for firm-specific impacts of…
Calibrating blackbox machine learning models to achieve risk control is crucial to ensure reliable decision-making. A rich line of literature has been studying how to calibrate a model so that its predictions satisfy explicit finite-sample…
This paper presents two cases of random banking data generators based on migration matrices and scoring rules. The banking data generator is a new hope in researches of finding the proving method of comparisons of various credit scoring…
In the paper, we use and investigate copulas models to represent multivariate dependence in financial time series. We propose the algorithm of risk measure computation using copula models. Using the optimal mean-$CVaR$ portfolio we compute…
We propose a route for the evaluation of risk based on a transformation of the covariance matrix. The approach uses a `potential' or `objective' function. This allows us to rescale data from different assets (or sources) such that each data…
We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
We implement momentum strategies using reward-risk measures as ranking criteria based on classical tempered stable distribution. Performances and risk characteristics for the alternative portfolios are obtained in various asset classes and…
This note presents a kind of the strong law of large numbers for an insurance risk caused by a single catastrophic event rather than by an accumulation of independent and identically distributed risks. We derive this result by a large…
We propose a distributional framework for benchmarking socio-technical risks of foundation models with quantified statistical significance. Our approach hinges on a new statistical relative testing based on first and second order stochastic…