The topics of Economic Capital modelling, reverse stress testing and credit limits are inextricably intertwined as they all focus on exceptional loss events. In this paper, we use the KVA framework in to frame these three topics within a single unified approach. We propose setting credit limits...

Prices in financial markets must move continuously and surprisingly to support their levels with returns. Consequently the function announcing the arrival rate of moves of different sizes becomes the equilibrium object, necessitating a reformulation of risk reward concepts in these terms. It is...

Equity index collar strategies are often perceived as a way for investors, at little to no cost, to exchange some upside exposure for reduced losses on the downside. That perception may be accurate if one considers only the net dollar cost of the strategy's initial option trades, but it fails to...

This paper aims at contributing to the literature in three ways: First, we re-evaluate the performance of popular Value-at-Risk (VaR) estimation methods on freight rates amid the adverse economic consequences of the recent financial and sovereign debt crisis. Secondly we provide a detailed and...

A central consideration for the use of any pricing model is the ability to calibrate that model to market or historical prices. Whether the information needed by the model can be effectively implied from the data or not is one part of the calibration problem. However, in many applications, the...