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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…
An investor is estimating net present value of a firm project and performs risk analysis. Usually it is created portfolio hierarchies and make comparison of variants of project based on these hierarchies. Then one finds that portfolio which…
This paper concerns sequential computation of risk measures for financial data and asks how, given a risk measurement procedure, we can tell whether the answers it produces are `correct'. We draw the distinction between `external' and…
It is shown that the axioms for coherent risk measures imply that whenever there is an asset in a portfolio that dominates the others in a given sample (which happens with finite probability even for large samples), then this portfolio…
We introduce a novel covariance estimator for portfolio selection that adapts to the non-stationary or persistent heteroskedastic environments of financial time series by employing exponentially weighted averages and nonlinearly shrinking…
Credit assessments activities are essential for financial institutions and allow the global economy to grow. Building robust, solid and accurate models that estimate the probability of a default of a company is mandatory for credit…
We study the notion of informedness in a client-consultant setting. Using a software simulator, we examine the extent to which it pays off for consultants to provide their clients with advice that is well-informed, or with advice that is…
We provided proof here that coefficient of variation (CV) is a direct measure of risk using an equation that has been derived here for the first time. We also presented a method to generate a stock CV based on return that strongly…
We present an analytical model to study the role of expectation feedbacks and overlapping portfolios on systemic stability of financial systems. Building on [Corsi et al., 2016], we model a set of financial institutions having Value at Risk…
In software project management, risk management is a critical factor. Project managers use existing lists of risk or perform brainstorming to identify the risks. However, it is not easy to perceive all the risks objectively. As a result,…
We address the problem that classical risk measures may not detect the tail risk adequately. This can occur for instance due to averaging when calculating the Expected Shortfall. The current literature proposes the so-called adjusted…
We propose a new deep learning approach for the quantification of name concentration risk in loan portfolios. Our approach is tailored for small portfolios and allows for both an actuarial as well as a mark-to-market definition of loss. The…
The risk of a credit portfolio depends crucially on correlations between the probability of default (PD) in different economic sectors. Often, PD correlations have to be estimated from relatively short time series of default rates, and the…
Privacy risk assessments aim to analyze and quantify the privacy risks associated with new systems. As such, they are critically important in ensuring that adequate privacy protections are built in. However, current methods to quantify…
We study the sensitivity to estimation error of portfolios optimized under various risk measures, including variance, absolute deviation, expected shortfall and maximal loss. We introduce a measure of portfolio sensitivity and test the…
This paper examines the precision of estimators of Quantile-Based Risk Measures (Value at Risk, Expected Shortfall, Spectral Risk Measures). It first addresses the question of how to estimate the precision of these estimators, and proposes…
Managing a portfolio to a risk model can tilt the portfolio toward weaknesses of the model. As a result, the optimized portfolio acquires downside exposure to uncertainty in the model itself, what we call "second order risk." We propose a…
This paper was presented and written for two seminars: a national UK University Risk Conference and a Risk Management industry workshop. The target audience is therefore a cross section of Academics and industry professionals. The current…
We review the recently introduced concept of variety of a financial portfolio and we sketch its importance for risk control purposes. The empirical behaviour of variety, correlation, exceedance correlation and asymmetry of the probability…
In this paper we discuss a general methodology to compute the market risk measure over long time horizons and at extreme percentiles, which are the typical conditions needed for estimating Economic Capital. The proposed approach extends the…