One of the main problems in the advanced measurement approach to determine operational risk regulatory capital, consists of the computation of the distribution of losses when the data is made up of aggregated losses caused by different types of risk events in different business lines. A similar...

The problem of determining probability densities from data is important in many fields, in particular in insurance and risk analysis. The method of maximum entropy has proven to be a powerful tool to determine probability densities from a few values of its Laplace transform. This is so, even...

A risk manager may be faced with the following problem: she/he has obtained loss data collected during a year, but the data only contains the total number events and the total loss for that year. She/he suspects that there are different sources of risk, each occurring with a different frequency,...

An important problem in the insurance and banking industries is that of pricing risk or premium valuation. When the empirical data is not large, and loss distributions are inferred from the data, a potentially large sample dependence of the premia on the data is to be expected. The maximum...

Mounting empirical evidence suggests that the observed extreme prices within a trading period can provide valuable information about the volatility of the process within that period. In this paper we define a class of stochastic volatility models that uses opening and closing prices along with...

In this paper, we describe a general method for constructing the posterior distribution of an option price. Our framework takes as inputs the prior distributions of the parameters of the stochastic process followed by the underlying, as well as the likelihood function implied by the observed...

In an arbitrage-free economy with non-zero bid-ask spreads, the presence of payoffs, whose price is lower than the price of another payoff where the former dominates the latter, can not be discarded in general. However, their presence is a true market anomaly when the former price corresponds to...

This paper aims to contribute to an improved theoretical and empirical understanding of the role that corporation has to play in anticorruption efforts. Research findings/insights: Using cross-country data from three databases (Bribe Payers Index, Corruption Perceptions Index, and Doing...

Power Purchase Agreements (PPA) play a significant role in deploying renewable energy, a crucial development to meet climate change challenges. Participants set the PPA price through opaque negotiation processes. We present novel, replicable, and transparent financial models to compute the PPA...

This paper deduces the optimal futures position for hedging joint price and production risks of a renewable Power Purchase Agreement. We develop static and dynamic closed-form and numerical copula-based hedging formulas and test the models employing exchange-traded electricity futures contracts...