Related papers: Calculating credit risk capital charges with the o…
We introduce a new method to calculate the credit exposure of European and path-dependent options. The proposed method is able to calculate accurate expected exposure and potential future exposure profiles under the risk-neutral and the…
Systemic risk is a rapidly developing area of research. Classical financial models often do not adequately reflect the phenomena of bubbles, crises, and transitions between them during credit cycles. To study very improbable events,…
The valuation of over-the-counter derivatives is subject to a series of valuation adjustments known as xVA, which pose additional risks for financial institutions. Associated risk measures, such as the value-at-risk of an underlying…
We propose a portfolio approach for operational risk quantification based on a class of analytical models from which we derive new results on the correlation problem. In particular, we show that uniform correlation is a robust assumption…
Credit Valuation Adjustment is a balance sheet item which is nowadays subject to active risk management by specialized traders. However, one of the most important risk factors, which is the vector of default intensities of the counterparty,…
Credit Suisse First Boston (CSFB) launched in 1997 the model CreditRisk+ which aims at calculating the loss distribution of a credit portfolio on the basis of a methodology from actuarial mathematics. Knowing the loss distribution, it is…
Credit (CVA), Debit (DVA) and Funding Valuation Adjustments (FVA) are now familiar valuation adjustments made to the value of a portfolio of derivatives to account for credit risks and funding costs. However, recent changes in the…
We design a system for risk-analyzing and pricing portfolios of non-performing consumer credit loans. The rapid development of credit lending business for consumers heightens the need for trading portfolios formed by overdue loans as a…
This paper introduces a new semi-parametric approach to the pricing and risk management of bespoke CDO tranches, with a particular attention to bespokes that need to be mapped onto more than one reference portfolio. The only user input in…
In recent years, a CRA (Credit Risk Analysis) quantum algorithm with a quadratic speedup over classical analogous methods has been introduced. We propose a new variant of this quantum algorithm with the intent of overcoming some of the most…
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…
To quantify an operational risk capital charge under Basel II, many banks adopt a Loss Distribution Approach. Under this approach, quantification of the frequency and severity distributions of operational risk involves the bank's internal…
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…
A multivariate quantile regression model with a factor structure is proposed to study data with many responses of interest. The factor structure is allowed to vary with the quantile levels, which makes our framework more flexible than the…
Finance is one of the promising field for industrial application of quantum computing. In particular, quantum algorithms for calculation of risk measures such as the value at risk and the conditional value at risk of a credit portfolio have…
In the field of quantitative finance, volatility models, such as ARCH, GARCH, FIGARCH, SV, EWMA, play the key role in risk and portfolio management. Meanwhile, factor investing is more and more famous since mid of 20 century. CAPM, Fama…
In this paper, a Monte Carlo based approach for the quantification of the importance of the scattering input parameters with respect to the failure probability is presented. Using the basic idea of the alpha-factors of the First Order…
We study two different contributions to the theory of (scalar) systemic risk measures. Namely the first aggregate or axiomatic approach and the first inject capital approach. For this purpose we establish a general framework, which is rich…
A simple, yet reasonably accurate, analytical technique is proposed for multi-factor structural credit portfolio models. The accuracy of the technique is demonstrated by benchmarking against Monte Carlo simulations. The approach presented…
The credit crisis of 2007 and 2008 has thrown much focus on the models used to price mortgage backed securities. Many institutions have relied heavily on the credit ratings provided by credit agency. The relationships between management of…