Related papers: Credit Valuation Adjustment with Replacement Close…
Companies try to maximize their profits by recovering returned products of highly uncertain quality and quantity. In this paper, a reverse logistics network for an Original Equipment Manufacturer (OEM) is presented. Returned products are…
We study a model of clearing in an interbank network with crossholdings and default charges. Following the Eisenberg--Noe approach, we define the model via a set of natural financial regulations including those related with eventual default…
We introduce an innovative theoretical framework to model derivative transactions between defaultable entities based on the principle of arbitrage freedom. Our framework extends the traditional formulations based on Credit and Debit…
The recent explosion in the amount and dimensionality of data has exacerbated the need of trading off computational and statistical efficiency carefully, so that inference is both tractable and meaningful. We propose a framework that…
Machine learning plays an essential role in preventing financial losses in the banking industry. Perhaps the most pertinent prediction task that can result in billions of dollars in losses each year is the assessment of credit risk (i.e.,…
We consider the problem of controlling an unknown linear dynamical system under adversarially changing convex costs and full feedback of both the state and cost function. We present the first computationally-efficient algorithm that attains…
A major challenge in training deep neural networks is overfitting, i.e. inferior performance on unseen test examples compared to performance on training examples. To reduce overfitting, stochastic regularization methods have shown superior…
The relentless process of tracking and remediating vulnerabilities is a top concern for cybersecurity professionals. The key challenge is trying to identify a remediation scheme specific to in-house, organizational objectives. Without a…
This thesis presents the Conditional Value-at-Risk concept and combines an analysis that covers its application as a risk measure and as a vector norm. For both areas of application the theory is revised in detail and examples are given to…
We study a two-sided market, wherein, price-sensitive heterogeneous customers and servers arrive and join their respective queues. A compatible customer-server pair can then be matched by the platform, at which point, they leave the system.…
Recourse provides individuals who received undesirable labels (e.g., denied a loan) from algorithmic decision-making systems with a minimum-cost improvement suggestion to achieve the desired outcome. However, in practice, models often get…
The recent banking crisis has again emphasized the importance of understanding and mitigating systemic risk in financial networks. In this paper, we study a market-driven approach to rescue a bank in distress based on the idea of claims…
This work theoretically studies a ubiquitous reinforcement learning policy for controlling the canonical model of continuous-time stochastic linear-quadratic systems. We show that randomized certainty equivalent policy addresses the…
Credit value adjustment (CVA) is the charge applied by financial institutions to the counterparty to cover the risk of losses on a counterpart default event. In this paper we estimate such a premium under the Bates stochastic model (Bates…
This paper presents a novel credit scoring approach using neural networks to address class imbalance and out-of-time prediction challenges. We develop a specific optimizer and loss function inspired by Hamiltonian mechanics that better…
We consider the problem of recovering a low-rank matrix from its clipped observations. Clipping is conceivable in many scientific areas that obstructs statistical analyses. On the other hand, matrix completion (MC) methods can recover a…
Cost-Sensitive Online Classification has drawn extensive attention in recent years, where the main approach is to directly online optimize two well-known cost-sensitive metrics: (i) weighted sum of sensitivity and specificity; (ii) weighted…
Wrong-way risk in counterparty and funding exposures is most dramatic in the situations of systemic crises and tails events. A consistent model of wrong-way risk (WWR) is developed here with the probability-weighted addition of tail events…
Cash collateral is perfect in that it provides simultaneous counterparty credit risk protection and derivatives funding. Securities are imperfect collateral, because of collateral segregation or differences in CSA haircuts and repo…
Is an option to early terminate a swap at its market value worth zero? At first sight it is, but in presence of counterparty risk it depends on the criteria used to determine such market value. In case of a single uncollateralised swap…