Related papers: Estimation of inter-sector asset correlations

A simple method is proposed to estimate the instantaneous correlations between state variables in a hybrid system from the empirical correlations between observable market quantities such as spot rate, stock price and implied volatility.…

Estimation of the covariance matrix of asset returns is crucial to portfolio construction. As suggested by economic theories, the correlation structure among assets differs between emerging markets and developed countries. It is therefore…

Risk assessment under different possible scenarios is a source of uncertainty that may lead to concerning financial losses. We address this issue, first, by adapting a robust framework to the class of spectral risk measures. Second, we…

We study the dynamics of the linear and non-linear serial dependencies in financial time series in a rolling window framework. In particular, we focus on the detection of episodes of statistically significant two- and three-point…

This paper is part of the research on the interlinkages between insurers and their contribution to systemic risk on the insurance market. Its main purpose is to present the results of the analysis of linkage dynamics and systemic risk in…

This paper assumes that the randomness of market trade values and volumes determines the properties of stochastic market prices. We derive the direct dependence of the first two price statistical moments and price volatility on statistical…

Interbank contagion can theoretically exacerbate losses in a financial system and lead to additional cascade defaults during downturn. In this paper we produce default analysis using both regression and neural network models to verify…

The paper analyzes risk assessment for cash flows in continuous time using the notion of convex risk measures for processes. By combining a decomposition result for optional measures, and a dual representation of a convex risk measure for…

We propose a framework combining detrended fluctuation analysis with standard regression methodology. The method is built on detrended variances and covariances and it is designed to estimate regression parameters at different scales and…

We take a look the changes of different asset prices over variable periods, using both traditional and spectral methods, and discover universality phenomena which hold (in some cases) across asset classes.

This paper presents an approach to modeling progressive event-history data when the overall objective is prediction based on time-dependent covariates. This approach does not model the hazard function directly. Instead, it models the…

This article proposes a generalized notion of extreme multivariate dependence between two random vectors which relies on the extremality of the cross-covariance matrix between these two vectors. Using a partial ordering on the…

This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Under fairly general assumptions for the distribution of the total net…

Risk management is an important practice in the banking industry. In this paper we develop a new methodology to estimate and predict the probability of default (PD) based on the rating transition matrices, which relates the rating…

Time series models, typically trained on numerical data, are designed to forecast future values. These models often rely on weighted averaging techniques over time intervals. However, real-world time series data is seldom isolated and is…

We give a new predictive mathematical model for macroeconomics, which deals specifically with asset prices and earnings fluctuations, in the presence of a dynamic economy involving mergers, acquisitions, and hostile takeovers. Consider a…

Many prediction problems across science and engineering, especially in finance and economics, involve large cross-sections of individual time series, where each unit (e.g., a loan, stock, or customer) is driven by unit-level features and…

We study a credit risk model which captures effects of economic interactions on a firm's default probability. Economic interactions are represented as a functionally defined graph, and the existence of both cooperative, and competitive,…

The concept of distance covariance/correlation was introduced recently to characterize dependence among vectors of random variables. We review some statistical aspects of distance covariance/correlation function and we demonstrate its…

This letter explores the behavior of conditional correlations among main cryptocurrencies, stock and bond indices, and gold, using a generalized DCC class model. From a portfolio management point of view, asset correlation is a key metric…