Showing 1 - 10 of 154
Recent crises in the financial industry have shown weaknesses in the modeling of Risk-Weighted Assets (RWAs). Relatively minor model changes may lead to substantial changes in the RWA numbers. Similar problems are encountered in the Value-at-Risk (VaR)-aggregation of risks. In this article, we...
Persistent link: https://www.econbiz.de/10010421286
We introduce the Mixability Detection Procedure (MDP) to check whether a set of d distribution functions is jointly mixable at a given confidence level. The procedure is based on newly established results regarding the convergence rate of the minimal variance problem within the class of joint...
Persistent link: https://www.econbiz.de/10013033010
The probabilistic characterization of the relationship between two or more random variables calls for a notion of dependence. Dependence modeling leads to mathematical and statistical challenges; recent developments in extremal dependence concepts have drawn a lot of attention in probability and...
Persistent link: https://www.econbiz.de/10013033602
Recent crises in the financial industry have shown weaknesses in the modeling of Risk-Weighted Assets (RWAs). Relatively minor model changes may lead to substantial changes in the RWA numbers. Similar problems are encountered in the Value-at-Risk (VaR)-aggregation of risks. In this article, we...
Persistent link: https://www.econbiz.de/10011030553
In this paper, we investigate the asymptotic behavior of the portfolio diversification ratio based on Value-at-Risk (quantile) under dependence uncertainty, which we refer to as "worst-case diversification limit." We show that the worst-case diversification limit is equal to the upper limit of...
Persistent link: https://www.econbiz.de/10013004872
We propose a theory for rating financial securities based on a concept of self-consistency, which does not allow issuers to gain, by tranching financial securities, from investors who rely on the rating criterion. While the expected loss criterion used by Moody's satisfies self-consistency, the...
Persistent link: https://www.econbiz.de/10012846000
Research related to aggregation, robustness, and model uncertainty of regulatory risk measures, for instance, Value-at-Risk (VaR) and Expected Shortfall (ES), is of fundamental importance within quantitative risk management. In risk aggregation, marginal risks and their dependence structure are...
Persistent link: https://www.econbiz.de/10013029101
Many optimization problems in probabilistic combinatorics and mass transportation impose fixed marginal constraints. A natural and open question in this field is to determine all possible distributions of the sum of random variables with given marginal distributions; the notion of joint...
Persistent link: https://www.econbiz.de/10013029225
This paper investigates macroprudential policies and their role in containing systemic risk in China. It shows that China faces systemic risk in both the time (procyclicality) and cross-sectional (contagion) dimensions. The former is reflected as credit and asset price risks, while the latter is...
Persistent link: https://www.econbiz.de/10014395294
Suppose that a decision maker faces a random outcome which is the sum of several risky components. If she is indifferent to the dependence structure of the risky components, then we say that she (or her preference) is dependence neutral. Obviously, if the decision maker is risk neutral, i.e.,...
Persistent link: https://www.econbiz.de/10013224469