Related papers: Correlation scenarios and correlation stress testi…
Correlation testing provides a quick method of discriminating amongst potential terms to include in a nuclear mass formula or functional and is a necessary tool for further nuclear mass models; however a firm mathematical foundation of the…
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…
Financial markets typically exhibit dynamically complex properties as they undergo continuous interactions with economic and environmental factors. The Efficient Market Hypothesis indicates a rich difference in the structural complexity of…
In this article, we analyse optimal statistical arbitrage strategies from stochastic control and optimisation problems for multiple co-integrated stocks with eigenportfolios being factors. Optimal portfolio weights are found by solving a…
Accelerated life tests (ALTs) play a crucial role in reliability analyses, providing lifetime estimates of highly reliable products. Among ALTs, step-stress design increases the stress level at predefined times, while maintaining a constant…
Measurement and management of credit concentration risk is critical for banks and relevant for micro-prudential requirements. While several methods exist for measuring credit concentration risk within institutions, the systemic effect of…
Measures of association play a central role in the social sciences to quantify the strength of a linear relationship between the variables of interest. In many applications researchers can translate scientific expectations to hypotheses…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
Growth-optimal portfolios are guaranteed to accumulate higher wealth than any other investment strategy in the long run. However, they tend to be risky in the short term. For serially uncorrelated markets, similar portfolios with more…
We consider the portfolio optimization with risk measured by conditional value-at-risk, based on the stress event of chosen asset being equal to the opposite of its value-at-risk level, under the normality assumption. Solvability conditions…
Correlations and other collective phenomena in a schematic model of heterogeneous binary agents (individual spin-glass samples) are considered on the complete graph and also on 2d and 3d regular lattices. The system's stochastic dynamics is…
Wide class of elliptically contoured distributions is a popular model of stock returns distribution. However the important question of adequacy of the model is open. There are some results which reject and approve such model. Such results…
Monte Carlo Approaches for calculating Value-at-Risk (VaR) are powerful tools widely used by financial risk managers across the globe. However, they are time consuming and sometimes inaccurate. In this paper, a fast and accurate Monte Carlo…
Factor analysis is a flexible technique for assessment of multivariate dependence and codependence. Besides being an exploratory tool used to reduce the dimensionality of multivariate data, it allows estimation of common factors that often…
We develop a pseudo maximum likelihood method for latent factor analysis in short panels without imposing sphericity nor Gaussianity. We derive an asymptotically uniformly most powerful invariant test for the number of factors. On a large…
We develop correlated random measures, random measures where the atom weights can exhibit a flexible pattern of dependence, and use them to develop powerful hierarchical Bayesian nonparametric models. Hierarchical Bayesian nonparametric…
This paper deals with inference and prediction for multiple correlated time series, where one has also the choice of using a candidate pool of contemporaneous predictors for each target series. Starting with a structural model for the…
Using Random Matrix Theory one can derive exact relations between the eigenvalue spectrum of the covariance matrix and the eigenvalue spectrum of its estimator (experimentally measured correlation matrix). These relations will be used to…
In the setting of polynomial jump-diffusion dynamics, we provide an explicit formula for computing correlators, namely, cross-moments of the process at different time points along its path. The formula appears as a linear combination of…
This paper re-examines the problem of estimating risk premia in linear factor pricing models. Typically, the data used in the empirical literature are characterized by weakness of some pricing factors, strong cross-sectional dependence in…