Related papers: Default Distances Based on the CEV-KMV Model
We aim to analyze the behaviour of a finite-time stochastic system, whose model is not available, in the context of more rare and harmful outcomes. Standard estimators are not effective in making predictions about such outcomes due to their…
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…
In an efficient stock market, the returns and their time-dependent volatility are often jointly modeled by stochastic volatility models (SVMs). Over the last few decades several SVMs have been proposed to adequately capture the defining…
This paper aims to more effectively manage and mitigate stock market risks by accurately characterizing financial market returns and volatility. We enhance the Stochastic Volatility (SV) model by incorporating fat-tailed distributions and…
In many sequential decision-making problems we may want to manage risk by minimizing some measure of variability in costs in addition to minimizing a standard criterion. Conditional value-at-risk (CVaR) is a relatively new risk measure that…
We consider a structural default model in an interconnected banking network as in Lipton [International Journal of Theoretical and Applied Finance, 19(6), 2016], with mutual obligations between each pair of banks. We analyse the model…
The purpose of this paper is introducing rigorous methods and formulas for bilateral counterparty risk credit valuation adjustments (CVA's) on interest-rate portfolios. In doing so, we summarize the general arbitrage-free valuation…
We propose a method to assess the intrinsic risk carried by a financial position $X$ when the agent faces uncertainty about the pricing rule assigning its present value. Our approach is inspired by a new interpretation of the quasiconvex…
This work has the objective of estimating default probabilities and correlations of credit portfolios given default rate information through a Bayesian framework using Stan. We use Vasicek's single factor credit model to establish the…
In this short paper, we study the simulation of a large system of stochastic processes subject to a common driving noise and fast mean-reverting stochastic volatilities. This model may be used to describe the firm values of a large pool of…
The popular systemic risk measure CoVaR (conditional Value-at-Risk) and its variants are widely used in economics and finance. In this article, we propose joint dynamic forecasting models for the Value-at-Risk (VaR) and CoVaR. The CoVaR…
Since risky positions in multivariate portfolios can be offset by various choices of capital requirements that depend on the exchange rules and related transaction costs, it is natural to assume that the risk measures of random vectors are…
Risk measures for random vectors have been considered in multi-asset markets with transaction costs and financial networks in the literature. While the theory of set-valued risk measures provide an axiomatic framework for assigning to a…
We introduce a novel class of credit risk models in which the drift of the survival process of a firm is a linear function of the factors. The prices of defaultable bonds and credit default swaps (CDS) are linear-rational in the factors.…
We introduce a new identification strategy for uncertainty shocks to explain macroeconomic volatility in financial markets. The Chicago Board Options Exchange Volatility Index (VIX) measures market expectations of future volatility, but…
Risk sensitive decision making finds important applications in current day use cases. Existing risk measures consider a single or finite collection of random variables, which do not account for the asymptotic behaviour of underlying…
This paper proposes a Sieve Simulated Method of Moments (Sieve-SMM) estimator for the parameters and the distribution of the shocks in nonlinear dynamic models where the likelihood and the moments are not tractable. An important concern…
We model the term structure of the forward default intensity and the default density by using L\'evy random fields, which allow us to consider the credit derivatives with an after-default recovery payment. As applications, we study the…
In this paper, we investigate the quantitative exponential stability of the Korteweg-de Vries equation on a finite interval with its length close to the critical set. Sharp decay estimates are obtained via a constructive PDE control…
Although climate and nature related scenario analysis is increasingly important in finance, operational implementations remain limited for translating long horizon environmental scenarios into counterparty credit risk measures used in…