Related papers: Environmental CVA with K-Robust Wrong-Way Risk

We present a dialogue on Funding Costs and Counterparty Credit Risk modeling, inclusive of collateral, wrong way risk, gap risk and possible Central Clearing implementation through CCPs. This framework is important following the fact that…

The global financial crisis of 2007-2009 highlighted the crucial role systemic risk plays in ensuring stability of financial markets. Accurate assessment of systemic risk would enable regulators to introduce suitable policies to mitigate…

With the high frequency of highway accidents,studying how to use connected automated vehicle (CAV) to improve traffic efficiency and safety will become an important issue. In order to investigate how CAV can use the connected information…

The use of CVA to cover credit risk is widely spread, but has its limitations. Namely, dealers face the problem of the illiquidity of instruments used for hedging it, hence forced to warehouse credit risk. As a result, dealers tend to offer…

This paper presents a new method to assess default risk based on applying the CEV process to the KMV model. We find that the volatility of the firm asset value may not be a constant, so we assume the firm's asset value dynamics are given by…

Safety-critical scenarios are essential for the development of autonomous vehicles (AVs) but are rare in real-world driving data. While simulation offers a way to generate such scenarios, manually designed test cases lack scalability, and…

In this work we rigorously establish mathematical models to obtain the capital valuation adjustment (KVA) as part of the total valuation adjustments (XVAs). For this purpose, we use a semi-replication strategy based on market theory. We…

This paper develops risk-averse models to support system operators in planning and operating the electricity grid under uncertainty from renewable power generation. We incorporate financial risk hedging using conditional value at risk…

Risk forecasts drive trading constraints and capital allocation, yet losses are nonstationary and regime-dependent. This paper studies sequential one-sided VaR control via conformal calibration. I propose regime-weighted conformal risk…

This paper proposes a safety analysis method that facilitates a tunable balance between the worst-case and risk-neutral perspectives. First, we define a risk-sensitive safe set to specify the degree of safety attained by a stochastic…

We present a detailed analysis of interest rate derivatives valuation under credit risk and collateral modeling. We show how the credit and collateral extended valuation framework in Pallavicini et al (2011), and the related collateralized…

We study how the climate transition through a low-carbon economy, implemented by carbon pricing, propagates in a credit portfolio and precisely describe how carbon price dynamics affects credit risk measures such as probability of default,…

Initial margin requirements are becoming an increasingly common feature of derivative markets. However, while the valuation of derivatives under collateralisation (Piterbarg 2010, Piterbarg2012), under counterparty risk with unsecured…

Estimating customer lifetime value (CLV or LTV) is extremely important for making better business decisions. The proposed flexible proportional hazards model allows an estimation of lifetime value in contractual settings. This approach…

We introduce an arbitrage-free framework for robust valuation adjustments. An investor trades a credit default swap portfolio with a risky counterparty, and hedges credit risk by taking a position in defaultable bonds. The investor does not…

This paper proposes analytic forms of portfolio CoVaR and CoCVaR on the normal tempered stable market model. Since CoCVaR captures the relative risk of the portfolio with respect to a benchmark return, we apply it to the relative portfolio…

We show how to reduce the problem of computing VaR and CVaR with Student T return distributions to evaluation of analytical functions of the moments. This allows an analysis of the risk properties of systems to be carefully attributed…

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…

Conditional Value at Risk (CVaR) is a prominent risk measure that is being used extensively in various domains. We develop a new formula for the gradient of the CVaR in the form of a conditional expectation. Based on this formula, we…

Robust and reliable covariance estimates play a decisive role in financial and many other applications. An important class of estimators is based on Factor models. Here, we show by extensive Monte Carlo simulations that covariance matrices…