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Risk measures are important key figures to measure the adequacy of the reserves of a company. The most common risk measures in practice are Value-at-Risk (VaR) and Conditional Value-at-Risk (CVaR). Recently, quantum-based algorithms are…

The paper discusses capital allocation using the Euler formula and focuses on the risk measures Value-at-Risk (VaR) and Expected shortfall (ES). Some new results connected to this capital allocation is known. Two examples illustrate that…

Financial portfolios are often optimized for maximum profit while subject to a constraint formulated in terms of the Conditional Value-at-Risk (CVaR). This amounts to solving a linear problem. However, in its original formulation this…

The binomial tree method and the Monte Carlo (MC) method are popular methods for solving option pricing problems. However in both methods there is a trade-off between accuracy and speed of computation, both of which are important in…

Determining contributions by sub-portfolios or single exposures to portfolio-wide economic capital for credit risk is an important risk measurement task. Often economic capital is measured as Value-at-Risk (VaR) of the portfolio loss…

Canonical Variate Analysis (CVA) is a multivariate statistical technique and a direct application of Linear Discriminant Analysis (LDA) that aims to find linear combinations of variables that best differentiate between groups in a dataset.…

Although climate and nature related scenario analysis is increasingly important in finance, operational implementations remain limited for translating long horizon environmental scenarios into counterparty credit risk measures used in…

In this paper, we present a novel computational framework for portfolio-wide risk management problems, where the presence of a potentially large number of risk factors makes traditional numerical techniques ineffective. The new method…

In many sequential decision-making problems we may want to manage risk by minimizing some measure of variability in costs in addition to minimizing a standard criterion. Conditional value-at-risk (CVaR) is a relatively new risk measure that…

Conditional value-at-risk (CVaR) is a prominent risk measure in financial engineering, energy systems, and supply chain management. In these domains, Markov decision processes (MDPs) with a long-run CVaR criterion effectively mitigate cost…

We consider a two-factor model for the valuation of a non callable defaultable bond which pays coupons at certain given dates. The model under consideration is the Jump to Default Constant Elasticity of Variance (JDCEV) model. The JDCEV…

To solve nonlinear partial differential equations (PDEs) is one of the most common but important tasks in not only basic sciences but also many practical industries. We here propose a quantum variational (QuVa) PDE solver with the aid of…

Banks must manage their trading books, not just value them. Pricing includes valuation adjustments collectively known as XVA (at least credit, funding, capital and tax), so management must also include XVA. In trading book management we…

This article presents a generic model for pricing financial derivatives subject to counterparty credit risk. Both unilateral and bilateral types of credit risks are considered. Our study shows that credit risk should be modeled as American…

This study finds exact closed-form solutions for compensating variation (CV) and equivalent variation (EV) for both marginal and non-marginal changes in public goods given homothetic, but non-separable, utility where a single sufficient…

In this paper, we propose a neural network-based method for CVA computations of a portfolio of derivatives. In particular, we focus on portfolios consisting of a combination of derivatives, with and without true optionality, \textit{e.g.,}…

The inclusion of DVA in the fair-value of derivative transactions has now become standard accounting practice in most parts of the world. Furthermore, some sophisticated banks are including an FVA (Funding Valuation Adjustment), but since…

Even in the simple one-factor credit portfolio model that underlies the Basel II regulatory capital rules coming into force in 2007, the exact contributions to credit value-at-risk can only be calculated with Monte-Carlo simulation or with…

In mathematical finance, a process of calibrating stochastic volatility (SV) option pricing models to real market data involves a numerical calculation of integrals that depend on several model parameters. This optimization task consists of…

The two main issues for managing wrong way risk (WWR) for the credit valuation adjustment (CVA, i.e. WW-CVA) are calibration and hedging. Hence we start from a novel model-free worst-case approach based on static hedging of counterparty…