Related papers: Efficient Risk Estimation for the Credit Valuation…
In this study, we propose a new definition of multivariate conditional value-at-risk (MCVaR) as a set of vectors for discrete probability spaces. We explore the properties of the vector-valued MCVaR (VMCVaR) and show the advantages of…
Adaptive Monte Carlo methods are very efficient techniques designed to tune simulation estimators on-line. In this work, we present an alternative to stochastic approximation to tune the optimal change of measure in the context of…
Conditional Value-at-Risk (CoVaR) quantifies systemic financial risk by measuring the loss quantile of one asset, conditional on another asset experiencing distress. We develop a Transformer-based methodology that integrates financial news…
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…
Measuring risk is at the center of modern financial risk management. As the world economy is becoming more complex and standard modeling assumptions are violated, the advanced artificial intelligence solutions may provide the right tools to…
CVaR (Conditional Value at Risk) is a risk metric widely used in finance. However, dynamically optimizing CVaR is difficult since it is not a standard Markov decision process (MDP) and the principle of dynamic programming fails. In this…
The binomial tree method and the Monte Carlo (MC) method are popular methods for solving option pricing problems. However in both methods there is a trade-off between accuracy and speed of computation, both of which are important in…
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…
Hedging a portfolio containing autocallable notes presents unique challenges due to the complex risk profile of these financial instruments. In addition to hedging, pricing these notes, particularly when multiple underlying assets are…
During recent years the counterparty risk subject has received a growing attention because of the so called Basel Accord. In particular the Basel III Accord asks the banks to fulfill finer conditions concerning counterparty credit exposures…
Control variates are variance reduction tools for Monte Carlo estimators. They can provide significant variance reduction, but usually require a large number of samples, which can be prohibitive when sampling or evaluating the integrand is…
This paper investigates calculations of robust funding valuation adjustment (FVA) for over the counter (OTC) derivatives under distributional uncertainty using Wasserstein distance as the ambiguity measure. Wrong way funding risk can be…
In this paper, we present a novel computational framework for portfolio-wide risk management problems, where the presence of a potentially large number of risk factors makes traditional numerical techniques ineffective. The new method…
Value at Risk (VaR) and stress testing are two of the most widely used approaches in portfolio risk management to estimate potential market value losses under adverse market moves. VaR quantifies potential loss in value over a specified…
We study risk-sensitive planning under partial observability using the dynamic risk measure Iterated Conditional Value-at-Risk (ICVaR). A policy evaluation algorithm for ICVaR is developed with finite-time performance guarantees that do not…
This paper proposes an important extension to Conditional Value-at-Risk (CoVaR), the popular systemic risk measure, and investigates its properties on the cryptocurrency market. The proposed Vulnerability-CoVaR (VCoVaR) is defined as the…
Valuation of Credit Valuation Adjustment (CVA) has become an important field as its calculation is required in Basel III, issued in 2010, in the wake of the credit crisis. Exposure, which is defined as the potential future loss of a default…
The aim of this paper is to describe a new an integrated methodology for project control under uncertainty. This proposal is based on Earned Value Methodology and risk analysis and presents several refinements to previous methodologies.…
In this paper we discuss a general methodology to compute the market risk measure over long time horizons and at extreme percentiles, which are the typical conditions needed for estimating Economic Capital. The proposed approach extends the…
We introduce a new method to calculate the credit exposure of European and path-dependent options. The proposed method is able to calculate accurate expected exposure and potential future exposure profiles under the risk-neutral and the…