Related papers: The Corporate Bond Factor Replication Crisis
Risk-averse investors often wish to exclude stocks from their portfolios that bear high credit risk, which is a measure of a firm's likelihood of bankruptcy. This risk is commonly estimated by constructing signals from quarterly accounting…
Valuing corporate bonds in systemic economies is challenging due to intricate webs of inter-institutional exposures. When a bank defaults, cascading losses propagate through the network, with payments determined by a system of fixed-point…
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Under fairly general assumptions for the distribution of the total net…
The credit rating is an evaluation of a company's credit risk that values the ability to pay back the debt and predict the likelihood of the debtor defaulting. There are various features influencing credit rating. Therefore, it is essential…
Reproducibility problems that have long affected machine learning and reinforcement learning are now surfacing in agent research: papers compare systems by reported scores while leaving the rollout records behind those scores difficult to…
We consider a conditional factor model for a multivariate portfolio of United States equities in the context of analysing a statistical arbitrage trading strategy. A state space framework underlies the factor model whereby asset returns are…
We develop factor copula models for analysing the dependence among mixed continuous and discrete responses. Factor copula models are canonical vine copulas that involve both observed and latent variables, hence they allow tail, asymmetric…
Query rewriting (QR) systems are widely used to reduce the friction caused by errors in a spoken language understanding pipeline. However, the underlying supervised models require a large number of labeled pairs, and these pairs are hard…
This paper explores vulnerabilities in RSA cryptosystems that arise from improper prime number selection during key generation. We examine two primary attack vectors: Fermat's factorization method, which exploits RSA keys generated with…
We introduce When Alpha Disappears, a paired evaluation benchmark for diagnosing decision-time leakage in financial machine-learning backtests. Rather than treating leakage as a binary property, the benchmark estimates protocol-induced…
Estimating the covariance of asset returns, i.e., the risk model, is a key component of financial portfolio construction and evaluation. Most risk modeling approaches produce a factor model that decomposes the asset variability into two…
This paper studies an online replication problem for distributed data access. The goal is to dynamically create and delete data copies in a multi-server system as time passes to minimize the total storage and network cost of serving access…
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…
The use of machine learning for statistical modeling (and thus, generative modeling) has grown in popularity with the proliferation of time series models, text-to-image models, and especially large language models. Fundamentally, the goal…
Software development, despite all the significant improvements it contributes to society, is a very expensive high-risk venture. Every software project commences with the intention to deliver a software product on time and within budget,…
The solution to science's replication crisis is a new ecosystem in which scientists sell what they learn from their research. In each pairwise transaction, the information seller makes (loses) money if he turns out to be correct…
While Indices, Index tracking funds and ETFs have grown in popularity during then last ten years, there are many structural problems inherent in Index calculation methodologies and the legal/economic structure of ETFs. These problems raise…
According to theoretical models of valuing risky corporate securities, risk of default is primary component in overall yield spread. However, sizable empirical literature considers it otherwise by giving more importance to non-default risk…
In this paper, we investigate the butterfly factorization problem, i.e., the problem of approximating a matrix by a product of sparse and structured factors. We propose a new formal mathematical description of such factors, that encompasses…
In regulatory proceedings, few issues are more hotly debated than the cost of capital. This article formalises the theoretical foundation of cost of capital estimation for regulatory purposes. Several common regulatory practices lack a…