Companies have overlapping exposures to many different features that might plausibly affect their returns, like whether they're involved in a crowded trade, whether they're mentioned in an M&A rumor, or whether their supplier recently missed an earnings forecast. Yet, at any point in time, only...

Risk measurement and pricing of financial positions are based on modeling assumptions, which are common assumptions on the probability distribution of the position's outcomes. We associate a model with a probability measure and investigate model risk by considering a model space. First, we...

Revised standards for capital requirements for market risks in a bank's trading book have been issued as a result of the Fundamental Review of the Trading Book. Under the new standards, default risk needs to be measured and capitalized through a dedicated Default Risk Charge (DRC). While...

We introduce a simple model for the credit exposure to leveraged and collateralized counter-parties. Wrong-way risk is captured by linking the counter-party default probability directly to changes in the portfolio value. This applies e.g. to leveraged firms such as hedge funds where large...

As the third component of the Standardized Approach of the Fundamental Review of the Trading Book [1], the Residual Risk Add-On tries to capture the risks not covered by the other two components (Sensitivity Based Method and Default Risk Charge) and plays the role of Risk Not in VaR program or...

This paper presents an integrated risk management methodology for measuring and managing the economics, risks, and financial resources/constraints related to deposits and loans in a commercial bank. Within a comprehensive and integrated framework, we develop valuation and risk models for all...