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In risk theory, financial asset returns often follow heavy-tailed distributions. Investors and risk managers used to compare risk measures as the value at risk or tail value at risk in order over the whole confidence levels to avoid the…
In practice, the value-at-risk (VaR) for a longer holding period is often scaled using the 'square root of time rule'. The VaR is determined for a shorter holding period and then scaled up according to the desired holding period. For…
The negative externalities from an individual bank failure to the whole system can be huge. One of the key purposes of bank regulation is to internalize the social costs of potential bank failures via capital charges. This study proposes a…
The insufficient understanding of the credit network structure was recognized as a key factor for regulators' underestimation of the destructive systematic risk during the financial crisis that started in 2007. The existing credit network…
Hazard ratios are ubiquitously used in time to event analysis to quantify treatment effects. Although hazard ratios are invaluable for hypothesis testing, other measures of association, both relative and absolute, may be used to fully…
In this work we deal with correlated failure time (age at onset) data arising from population-based case-control studies, where case and control probands are selected by population-based sampling and an array of risk factor measures is…
When banks fail amidst financial crises, the public criticizes regulators for bailing out or liquidating specific banks, especially the ones that gain attention due to their size or dominance. A comprehensive assessment of regulators,…
In this article we propose a novel measure of systemic risk in the context of financial networks. To this aim, we provide a definition of systemic risk which is based on the structure, developed at different levels, of clustered neighbours…
This note outlines an approach to stress testing of covariance of financial time series, in the context of financial risk management. It discusses how the geodesic distance between covariance matrices implies a notion of plausibility of…
Survival analysis provides a well-established framework for modeling time-to-event data, with hazard and survival functions formally defined as population-level quantities. In applied work, however, these quantities are often interpreted as…
The banking systems that deal with risk management depend on underlying risk measures. Following the Basel II accord, there are two separate methods by which banks may determine their capital requirement. The Value at Risk measure plays an…
Risk measures for random vectors have been considered in multi-asset markets with transaction costs and financial networks in the literature. While the theory of set-valued risk measures provide an axiomatic framework for assigning to a…
Inspired by recent ideas on how the analysis of complex financial risks can benefit from analogies with independent research areas, we propose an unorthodox framework for mapping microfinance credit risk---a major obstacle to the…
Systemic risk is a rapidly developing area of research. Classical financial models often do not adequately reflect the phenomena of bubbles, crises, and transitions between them during credit cycles. To study very improbable events,…
Credit card has become popular mode of payment for both online and offline purchase, which leads to increasing daily fraud transactions. An Efficient fraud detection methodology is therefore essential to maintain the reliability of the…
The credit crisis roiling the world's financial markets will likely take years and entire careers to fully understand and analyze. A short empirical investigation of the current trends, however, demonstrates that the losses in certain…
We present a statistical test that can be used to verify supervisory requirements concerning overlapping time windows for the long-term calibration in rating systems. In a first step, we show that the long-run default rate is approximately…
The risk of a credit portfolio depends crucially on correlations between the probability of default (PD) in different economic sectors. Often, PD correlations have to be estimated from relatively short time series of default rates, and the…
Accurately assessing software vulnerabilities is essential for effective prioritization and remediation. While various scoring systems exist to support this task, their differing goals, methodologies and outputs often lead to inconsistent…
Credit Scores are ubiquitous and instrumental for loan providers and regulators. In this paper we showcase how micro-loan credit system can be developed in real setting. We show what challenges arise and discuss solutions. Particularly, we…