Related papers: Insurance valuation: A two-step generalised regres…
Frailty models are often the model of choice for heterogeneous survival data. A frailty model contains both random effects and fixed effects, with the random effects accommodating for the correlation in the data. Different estimation…
Affine rank minimization algorithms typically rely on calculating the gradient of a data error followed by a singular value decomposition at every iteration. Because these two steps are expensive, heuristic approximations are often used to…
We present a framework for modeling asset and portfolio dynamics, incorporating this information into portfolio optimization. For this framework, we introduce the Commonality Principle, providing a solution for the optimal selection of…
We propose a flexible framework for hedging a contingent claim by holding static positions in vanilla European calls, puts, bonds, and forwards. A model-free expression is derived for the optimal static hedging strategy that minimizes the…
When interest rate dynamics are described by the Libor Market Model as in BGM97, we show how some essential risk-management results can be obtained from the dual of the calibration program. In particular, if the objetive is to maximize…
Optimizing portfolio performance is a fundamental challenge in financial modeling, requiring the integration of advanced clustering techniques and data-driven optimization strategies. This paper introduces a comparative backtesting approach…
Covariate imbalance between treatment groups makes it difficult to compare cumulative incidence curves in competing risk analyses. In this paper we discuss different methods to estimate adjusted cumulative incidence curves including inverse…
We propose post-screening portfolio selection (PS$^2$), a two-step framework for high-dimensional mean--variance investing. First, assets are screened by Lasso-type regression of a constant on excess returns without an intercept. Second,…
We explore credit risk pricing by modeling equity as a call option and debt as the difference between the firm's asset value and a put option, following the structural framework of the Merton model. Our approach proceeds in two stages:…
Portfolio Selection is an important real-world financial task and has attracted extensive attention in artificial intelligence communities. This task, however, has two main difficulties: (i) the non-stationary price series and complex asset…
Value adjustment of uncollateralized trades is determined within a risk-neutral pricing framework. When hedging such trades, investors cannot freely trade protection on their own name, thus facing an incomplete market. This fact is…
The use of CVA to cover credit risk is widely spread, but has its limitations. Namely, dealers face the problem of the illiquidity of instruments used for hedging it, hence forced to warehouse credit risk. As a result, dealers tend to offer…
We study the multiplicative hazards model with intermittently observed longitudinal covariates and time-varying coefficients. For such models, the existing ad hoc approach, such as the last value carried forward, is biased. We propose a…
We study a quadratic hedging problem for a sequence of contingent claims with random weights in discrete time. We obtain the optimal hedging strategy explicitly in a recursive representation, without imposing the non-degeneracy (ND)…
A method for calculating multi-portfolio time consistent multivariate risk measures in discrete time is presented. Market models for $d$ assets with transaction costs or illiquidity and possible trading constraints are considered on a…
Portfolio optimization is a ubiquitous problem in financial mathematics that relies on accurate estimates of covariance matrices for asset returns. However, estimates of pairwise covariance could be better and calculating time-sensitive…
The Basel II internal ratings-based (IRB) approach to capital adequacy for credit risk plays an important role in protecting the Australian banking sector against insolvency. We outline the mathematical foundations of regulatory capital for…
We investigate model risk and distributionally robust optimization (DRO) under marginal and martingale constraints. Building on our previous work, we address the previously open case of static hedging with second-period maturity vanilla…
High-dimensional prediction typically comprises two steps: variable selection and subsequent least-squares refitting on the selected variables. However, the standard variable selection procedures, such as the lasso, hinge on tuning…
We derive valuations of a portfolio of financial instruments from a securities lending perspective, under different assumptions, and show a weighting scheme that converges to the true valuation. We illustrate conditions under which our…