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The stability of a complex financial system may be assessed by measuring risk contagion between various financial institutions with relatively high exposure. We consider a financial network model using a bipartite graph of financial…
To achieve robustness of risk across different assets, risk parity investing rules, a particular state of risk contributions, have grown in popularity over the previous few decades. To generalize the concept of risk contribution from the…
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…
This paper attempts to provide a decision-theoretic foundation for the measurement of economic tail risk, which is not only closely related to utility theory but also relevant to statistical model uncertainty. The main result is that the…
This paper investigates risk measures derived from the expected maximum deficit in a continuous-time framework and develops optimal reserve allocation strategies across multiple lines of business. We formalize the expected maximum deficit…
Risk estimation is at the core of many learning systems. The importance of this problem has motivated researchers to propose different schemes, such as cross validation, generalized cross validation, and Bootstrap. The theoretical…
According to different typologies of activity and priority, risks can assume diverse meanings and it can be assessed in different ways. In general risk is measured in terms of a probability combination of an event (frequency) and its…
Evaluating the effects of time-varying exposures is essential for longitudinal studies. The effect estimation becomes increasingly challenging when dealing with hundreds of time-dependent confounders. We propose a Marginal Structure…
Conditional Autoregressive Value-at-Risk and Conditional Autoregressive Expectile have become two popular approaches for direct measurement of market risk. Since their introduction several improvements both in the Bayesian and in the…
In this paper, we investigate risk measures such as value at risk (VaR) and the conditional tail expectation (CTE) of the extreme (maximum and minimum) and the aggregate (total) of two dependent risks. In finance, insurance and the other…
This paper investigates the convergence properties of sample-average approximations (SAA) for set-valued systemic risk measures. We assume that the systemic risk measure is defined using a general aggregation function with some continuity…
We introduce a new approach for prudent risk evaluation based on stochastic dominance, which will be called the model aggregation (MA) approach. In contrast to the classic worst-case risk (WR) approach, the MA approach produces not only a…
The aim of this paper is to quantify and manage systemic risk caused by default contagion in the interbank market. We model the market as a random directed network, where the vertices represent financial institutions and the weighted edges…
Identifying and mitigating safety risks is paramount in a number of industries. In addition to guidelines and best practices, many industries already have safety management systems (SMSs) designed to monitor and reinforce good safety…
The instability of the financial system as experienced in recent years and in previous periods is often linked to credit defaults, i.e., to the failure of obligors to make promised payments. Given the large number of credit contracts, this…
We propose a dynamic model of dependence structure between financial institutions within a financial system and we construct measures for dependence and financial instability. Employing Markov structures of joint credit migrations, our…
We estimate generic statistical properties of a structural credit risk model by considering an ensemble of correlation matrices. This ensemble is set up by Random Matrix Theory. We demonstrate analytically that the presence of correlations…
This paper concerns sequential computation of risk measures for financial data and asks how, given a risk measurement procedure, we can tell whether the answers it produces are `correct'. We draw the distinction between `external' and…
Several phenomena are available representing market activity: volumes, number of trades, durations between trades or quotes, volatility - however measured - all share the feature to be represented as positive valued time series. When…
Systematic investment strategies are exposed to a subtle but pervasive vulnerability: the progressive erosion of their effectiveness as market regimes change. Traditional risk measures, designed to capture volatility or drawdowns, overlook…