We present a methodology to aggregate in a coherent manner conditional stress losses in a trading or banking book. The approach bypasses the specification of unconditional probabilities of the individual stress events and ensures by a linear programming approach so that the (subjective or...

An arbitrage-free two-factor model is presented, which is driven by the short rate and the consol yield, and which ensures log-normal short rate and positive rates. The market price of an arbitrary (discrete) set of discount bonds is recovered by construction, and an arbitrary degree of...

This note presents a simple, robust and computationally efficient way to calculate expectations of arbitrary future payoffs within the context of a Monte Carlo forward-induction methodology. The technique complements existing approximation techniques: while virtually all existing approximation...