Related papers: Profit and loss attribution: An empirical study
Current reporting standards for insurers require a decomposition of observed profits and losses in such a way that changes in the insurer's balance sheet can be attributed to specified risk factors. Generating such a decomposition is a…
Financial institutions and insurance companies that analyze the evolution and sources of profits and losses often look at risk factors only at discrete reporting dates, ignoring the detailed paths. Continuous-time decompositions avoid this…
This paper develops a decomposition of standard Risk Contribution (RC) into two economically interpretable components: inherent risk and correlation risk. Using a leave-one-out representation, each position's RC separates into a term…
In this paper, we propose ex-ante characteristics that predict the drop in risk-adjusted performance out-of-sample for a large set of stock anomalies published in finance and accounting academic journals. Our set of predictors is generated…
We develop a method to decompose the PnL of a portfolio of assets into four parts: (a) PnL due to FX rate changes, (b) PnL due to interest rate changes, (c) carry gain due to time passing, (d) PnL due to residual market risk changes (credit…
We develop a formalism for insurance profit optimisation for the in-force business constraint by regulatory and risk policy related requirements. This approach is applicable to Life, P&C and Reinsurance businesses and applies in all…
We explore a decomposition in which returns on a large class of portfolios relative to the market depend on a smooth non-negative drift and changes in the asset price distribution. This decomposition is obtained using general continuous…
In the stock market, a successful investment requires a good balance between profits and risks. Based on the learning to rank paradigm, stock recommendation has been widely studied in quantitative finance to recommend stocks with higher…
In strategic classification, an institution (e.g., a bank) anticipates adaptation from users who change their features to increase utility in a classification task (e.g., loan repayment). Since a key challenge is the distribution shift…
In order to properly manage risk, practitioners must understand the aggregate risks they are exposed to. Additionally, to properly price policies and calculate bonuses the relative riskiness of individual business units must be well…
In with-profit life insurance, the prudent valuation of future insurance liabilities leads to systematic surplus that mainly belongs to the policyholders and is redistributed as bonus. For a fair and lawful redistribution of surplus the…
We consider a financial intermediary managing assets and liabilities exposed to several risk sources and seeking an optimal portfolio strategy to minimise the initial capital invested and the total risk associated with investment losses and…
With the growing privacy concerns in recommender systems, recommendation unlearning, i.e., forgetting the impact of specific learned targets, is getting increasing attention. Existing studies predominantly use training data, i.e., model…
Factor modeling of asset returns has been a dominant practice in investment science since the introduction of the Capital Asset Pricing Model (CAPM) and the Arbitrage Pricing Theory (APT). The factors, which account for the systematic risk,…
Default risk significantly affects the corporate policies of a firm. We develop a model in which a limited liability entity subject to Poisson default shock jointly sets its dividend policy and capital structure to maximize the expected…
The quantification of diversification benefits due to risk aggregation plays a prominent role in the (regulatory) capital management of large firms within the financial industry. However, the complexity of today's risk landscape makes a…
We investigate how price variations of a stock are transformed into profits and losses (P&Ls) of a trend following strategy. In the frame of a Gaussian model, we derive the probability distribution of P&Ls and analyze its moments (mean,…
The aim of this paper is to introduce a method for computing the allocated Solvency II Capital Requirement (SCR) of each Risk which the company is exposed to, taking in account for the diversification effect among different risks. The…
With the growing privacy concerns in recommender systems, recommendation unlearning is getting increasing attention. Existing studies predominantly use training data, i.e., model inputs, as unlearning target. However, attackers can extract…
The valuation process that economic agents undergo for investments with uncertain payoff typically depends on their statistical views on possible future outcomes, their attitudes toward risk, and, of course, the payoff structure itself.…