Related papers: Robust Bernoulli Mixture Models for Credit Portfol…
In actuarial practice the dependency between contract limitations (deductibles, copayments) and health care expenditures are measured by the application of the Monte Carlo simulation technique. We propose, for the same goal, an alternative…
Foundation models - already transformative in domains such as natural language processing - are now starting to emerge for time-series tasks in finance. While these pretrained architectures promise versatile predictive signals, little is…
Using a family of modified Weibull distributions, encompassing both sub-exponentials and super-exponentials, to parameterize the marginal distributions of asset returns and their natural multivariate generalizations, we give exact formulas…
The classical reduced-form and filtration expansion framework in credit risk is extended to the case of multiple, non-ordered defaults, assuming that conditional densities of the default times exist. Intensities and pricing formulas are…
We examine volume computation of general-dimensional polytopes and more general convex bodies, defined as the intersection of a simplex by a family of parallel hyperplanes, and another family of parallel hyperplanes or a family of…
We compare two models of corporate default by calculating the Jeffreys-Kullback-Leibler divergence between their predicted default probabilities when asset correlations are either high or low. Our main results show that the divergence…
We study mean-risk optimal portfolio problems where risk is measured by Recovery Average Value at Risk, a prominent example in the class of recovery risk measures. We establish existence results in the situation where the joint distribution…
We extend the Vasi\v{c}ek loan portfolio model to a setting where liabilities fluctuate randomly and asset values may be subject to systemic jump risk. We derive the probability distribution of the percentage loss of a uniform portfolio and…
The publication of the pivotal state machine replication protocol PBFT laid the foundation for a large body of BFT protocols. While many successors to PBFT have been developed, there is no general technique to compare these protocols under…
Risk measures like Marginal Expected Shortfall and Marginal Mean Excess quantify conditional risk and in particular, aid in the understanding of systemic risk. In many such scenarios, models exhibiting heavy tails in the margins and…
In this work, we consider extensions of the dual risk model with proportional gains by introducing a dependence structure between gain sizes and gain interrarrival times. Among others, we further consider the case where the proportional…
A positive correlation between exposure and counterparty credit risk gives rise to the so-called Wrong-Way Risk (WWR). Even after a decade of the financial crisis, addressing WWR in both sound and tractable ways remains challenging.…
In this paper, we study how class imbalance, typical of low-default credit portfolios, affects the performance of logistic regression models. Using a simulation study with controlled data-generating mechanisms, we vary (i) the level of…
There are growing concerns for reserves estimation of incurred but not reported (IBNR) claims in actuarial sciences. In this paper, we propose a copula-based dependency model to capture the relationship between two main IBNR reserve…
The standard intensity-based approach for modeling defaults is generalized by making the deterministic term structure of the survival probability stochastic via a common jump process. The survival copula of the vector of default times is…
High precision analytical approximation is proposed for variance-covariance based risk allocation in a portfolio of risky assets. A general case of a single-period multi-factor Merton-type model with stochastic recovery is considered. The…
We quantify model risk of a financial portfolio whereby a multi-period mean-standard-deviation criterion is used as a selection criterion. In this work, model risk is defined as the loss due to uncertainty of the underlying distribution of…
Risk management is an important practice in the banking industry. In this paper we develop a new methodology to estimate and predict the probability of default (PD) based on the rating transition matrices, which relates the rating…
Changes in collateralization have been implicated in significant default (or near-default) events during the financial crisis, most notably with AIG. We have developed a framework for quantifying this effect based on moving between…
In a series of recent papers, Damiano Brigo, Andrea Pallavicini, and co-authors have shown that the value of a contract in a Credit Valuation Adjustment (CVA) setting, being the sum of the cash flows, can be represented as a solution of a…