Related papers: Estimation of inter-sector asset correlations
In this paper we analyzed dependencies in commodity markets investigating correlations of future contracts for commodities over the period 1998.09.01 - 2007.12.14. We constructed a minimal spanning tree based on the correlation matrix. The…
We study the dynamics of correlation and variance in systems under the load of environmental factors. A universal effect in ensembles of similar systems under the load of similar factors is described: in crisis, typically, even before…
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…
In normal times, it is assumed that financial institutions operating in non-overlapping sectors have complementary and distinct outcomes, typically reflected in mostly uncorrelated outcomes and asset returns. Such is the reasoning behind…
We study the statistical fluctuations (such as the variance) of causal set quantities, with particular focus on the causal set action. To facilitate calculating such fluctuations, we develop tools to account for correlations between causal…
In this paper, we model dependence between operational risks by allowing risk profiles to evolve stochastically in time and to be dependent. This allows for a flexible correlation structure where the dependence between frequencies of…
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 provide an overview of the relationship between financial networks and systemic risk. We present a taxonomy of different types of systemic risk, differentiating between direct externalities between financial organizations (e.g.,…
We propose two structural models for stochastic losses given default which allow to model the credit losses of a portfolio of defaultable financial instruments. The credit losses are integrated into a structural model of default events…
Operational risk is challenging to quantify because of the broad range of categories (fraud, technological issues, natural disasters) and the heavy-tailed nature of realized losses. Operational risk modeling requires quantifying how these…
The market practice of extrapolating different term structures from different instruments lacks a rigorous justification in terms of cash flows structure and market observables. In this paper, we integrate our previous consistent theory for…
Entries of datasets are often collected only if an event occurred: taking a survey, enrolling in an experiment and so forth. However, such partial samples bias classical correlation estimators. Here we show how to correct for such sampling…
People often deviate from expected utility theory when making risky and intertemporal choices. While the effects of probabilistic risk and time delay have been extensively studied in isolation, their interplay and underlying theoretical…
Measuring model risk is required by regulators on financial and insurance markets. We separate model risk into parameter estimation risk and model specification risk, and we propose expected shortfall type model risk measures applied to…
We estimate generic statistical properties of a structural credit risk model by considering an ensemble of correlation matrices. This ensemble is set up by Random Matrix Theory. We demonstrate analytically that the presence of correlations…
Testing the independence between random vectors is a fundamental problem in statistics. Distance correlation, a recently popular dependence measure, is universally consistent for testing independence against all distributions with finite…
Inspired by the recent literature on aggregation theory, we aim at relating the long range correlation of the stocks return volatility to the heterogeneity of the investors' expectations about the level of the future volatility. Based on a…
An average instantaneous cross-correlation function is introduced to quantify the interaction of the financial market of a specific time. Based on the daily data of the American and Chinese stock markets, memory effect of the average…
We extend to the multi-asset case the framework of a discrete time model of a single asset financial market developed in Ghoulmie et al (2005). In particular, we focus on adaptive agents with threshold behavior allocating their resources…
Multivariate spatial phenomena are ubiquitous, spanning domains such as climate, pandemics, air quality, and social economy. Cross-correlation between different quantities of interest at different locations is asymmetric in general. This…