Related papers: The Engineering of Skew: A Path-Dependent Framewor…
This study delves into the intricate realm of risk evaluation within the domain of specific financial derivatives, notably options. Unlike other financial instruments, like bonds, options are susceptible to broader risks. A distinctive…
Monitoring downside risk and upside risk to the key macroeconomic indicators is critical for effective policymaking aimed at maintaining economic stability. In this paper I propose a parametric framework for modelling and forecasting…
An appropriate calibration and forecasting of volatility and market risk are some of the main challenges faced by companies that have to manage the uncertainty inherent to their investments or funding operations such as banks, pension funds…
This study investigates the short-term asymptotic behavior of the implied volatility surface (IVS), with a particular focus on the at-the-money (ATM) skew and curvature, which are key determinants of the IVS shape and whose are widely…
Volatility of financial stock is referring to the degree of uncertainty or risk embedded within a stock's dynamics. Such risk has been received huge amounts of attention from diverse financial researchers. By following the concept of…
Uncertainty is prevalent in engineering design, data-driven problems, and decision making broadly. Due to inherent risk-averseness and ambiguity about assumptions, it is common to address uncertainty by formulating and solving conservative…
We propose a new financial model, the stochastic volatility model with sticky drawdown and drawup processes (SVSDU model), which enables us to capture the features of winning and losing streaks that are common across financial markets but…
This paper introduces a methodology for constructing a market index composed of a liquid risky asset and a liquid risk-free asset that achieves a fixed target volatility. Existing volatility-targeting strategies typically scale portfolio…
Securitization is a financial process where the cash flows of income-generating assets are sold to institutional investors as securities, liquidating illiquid assets. This practice presents persistent challenges due to the absence of a…
Resilience is a rehashed concept in natural hazard management - resilience of cities to earthquakes, to floods, to fire, etc. In a word, a system is said to be resilient if there exists a strategy that can drive the system state back to…
This paper expands traditional stochastic volatility models by allowing for time-varying skewness without imposing it. While dynamic asymmetry may capture the likely direction of future asset returns, it comes at the risk of leading to…
We describe a novel framework for estimating subsurface properties, such as rock permeability and porosity, from time-lapse observed seismic data by coupling full-waveform inversion, subsurface flow processes, and rock physics models. For…
This paper describes a flexible and tractable bottom-up dynamic correlation modelling framework with a consistent stochastic recovery specification. The stochastic recovery specification only models the first two moments of the spot…
In real-world decision-making problems, for instance in the fields of finance, robotics or autonomous driving, keeping uncertainty under control is as important as maximizing expected returns. Risk aversion has been addressed in the…
The multidimensional Uncertain Volatility Model leads to robust option pricing problems under joint volatility and correlation uncertainty. Their numerical resolution quickly becomes challenging because the associated stochastic control…
Shuffling strategies for stochastic gradient descent (SGD), including incremental gradient, shuffle-once, and random reshuffling, are supported by rigorous convergence analyses for arbitrary within-epoch permutations. In particular, random…
Skew-t copula models are attractive for the modeling of financial data because they allow for asymmetric and extreme tail dependence. We show that the copula implicit in the skew-t distribution of Azzalini and Capitanio (2003) allows for a…
Resilience is a rehashed concept in natural hazard management - resilience of cities to earthquakes, to floods, to fire, etc. In a word, a system is said to be resilient if there exists a strategy that can drive the system state back to…
This article develops a model that takes into account skewness risk in risk parity portfolios. In this framework, asset returns are viewed as stochastic processes with jumps or random variables generated by a Gaussian mixture distribution.…
This paper introduces a transformative framework for managing path-dependent financial risk by shifting from traditional distribution-centric models to a geometry-based approach. We propose the SigSwap as a new regulatory instrument that…