Related papers: Correlation scenarios and correlation stress testi…
We analyze the spectral properties of correlation matrices between distinct statistical systems. Such matrices are intrinsically non symmetric, and lend themselves to extend the spectral analyses usually performed on standard Pearson…
Accelerated life-testing (ALT) is a very useful technique for examining the reliability of highly reliable products. It allows testing the products at higher than usual stress conditions to induce failures more quickly and economically than…
Estimating and assessing the risk of a large portfolio is an important topic in financial econometrics and risk management. The risk is often estimated by a substitution of a good estimator of the volatility matrix. However, the accuracy of…
We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale…
Interest-rate risk is a key factor for property-casualty insurer capital. P&C companies tend to be highly leveraged, with bond holdings much greater than capital. For GAAP capital, bonds are marked to market but liabilities are not, so…
Humans are routinely exposed to mixtures of chemical and other environmental factors, making the quantification of health effects associated with environmental mixtures a critical goal for establishing environmental policy sufficiently…
A new approach to solving random matrix models directly in the large $N$ limit is developed. First, a set of numerical values for some low-pt correlation functions is guessed. The large $N$ loop equations are then used to generate values of…
AB testing aids business operators with their decision making, and is considered the gold standard method for learning from data to improve digital user experiences. However, there is usually a gap between the requirements of practitioners,…
We propose a Monte Carlo simulation method to generate stress tests by VaR scenarios under Solvency II for dependent risks on the basis of observed data. This is of particular interest for the construction of Internal Models and…
We study the feasibility and noise sensitivity of portfolio optimization under some downside risk measures (Value-at-Risk, Expected Shortfall, and semivariance) when they are estimated by fitting a parametric distribution on a finite sample…
Conditional forecasts of risk measures play an important role in internal risk management of financial institutions as well as in regulatory capital calculations. In order to assess forecasting performance of a risk measurement procedure,…
This article proposes omnibus portmanteau tests for contrasting adequacy of time series models. The test statistics are based on combining the autocorrelation function of the conditional residuals, the autocorrelation function of the…
It is often the case that risk assessment and prognostics are viewed as related but separate tasks. This chapter describes a risk-based approach to prognostics that seeks to provide a tighter coupling between risk assessment and fault…
We develop a Bayesian framework for variable selection in linear regression with autocorrelated errors, accommodating lagged covariates and autoregressive structures. This setting occurs in time series applications where responses depend on…
Finding the hedge ratios for a portfolio and risk compression is the same mathematical problem. Traditionally, regression is used for this purpose. However, regression has its own limitations. For example, in a regression model, we can't…
The problem of portfolio allocation in the context of stocks evolving in random environments, that is with volatility and returns depending on random factors, has attracted a lot of attention. The problem of maximizing a power utility at a…
Portfolio allocation with gross-exposure constraint is an effective method to increase the efficiency and stability of selected portfolios among a vast pool of assets, as demonstrated in Fan et al (2008). The required high-dimensional…
In this paper a novel approach for a measurement of stresses in a capital, which induce the capital flows between economic systems, is proposed. The proposals appeal to an apparatus offered by the statistical theory of shape. We propose a…
We study properties of the cross-sectional distribution of returns. A significant anti-correlation between dispersion and cross-sectional kurtosis is found such that dispersion is high but kurtosis is low in panic times, and the opposite in…
We introduce a continuous-time framework for the prediction of outstanding liabilities, in which chain-ladder development factors arise as a histogram estimator of a cost-weighted hazard function running in reversed development time. We use…