Default risk models have been widely employed to assess the ability of households and sovereigns to insure themselves against shocks. Grid search has often been used to solve these models because the complexity of the problem prevents the use of faster but less general methods. In this paper, we...

We develop an agent-based model of traditional banks and asset managers to investigate the contagion risk related to fire sales and balance sheet interactions. We take a structural approach to the price formation in fire sales as in Bluhm et al. (2014) and introduce a market clearing mechanism...

We identify the three types of risks involved in an art-secured lending operation and present a framework to assess their combined effects via a Monte Carlo simulation. Also, we derive some useful closed-form expressions that are suitable when the collateral consists of only one painting. To...

We develop an agent-based model of traditional banks and asset managers to investigate the contagion risk related to fire sales and balance sheet interactions. We take a structural approach to the price formation in fire sales as in Bluhm et al. (2014) and introduce a market clearing mechanism...

A kind of worst-case value-at-risk, GVaR, is defined to measure risk incorporating model uncertainty. Compared with most extant notions of worst-case VaR, GVaR can be computed by an explicit formula, and can be applied to large portfolios of several hundreds dimensions with low computational...

The catastrophic events are characterized by "low frequency and high severity". Nevertheless, during the last decades, both the frequency and the magnitude of these events have been significantly rising worldwide. In 2021, the European Commission adopted a new Strategy on Adaptation to Climate...

Risk Parity (RP), also called equally weighted risk contribution, is a recent approach to risk diversification for portfolio selection. RP is based on the principle that the fractions of the capital invested in each asset should be chosen so as to make the total risk contributions of all assets...

In this article we examine the pricing of option contracts on the strategic petroleum reserve (SPR) and consider how these can be used by both the government and refiners. We analyze the interaction between the call and put option contracts, taking into account the underlying game, in the...

We present a new profitable trading and risk management strategy with transaction cost for an adaptive equally weighted portfolio. Moreover, we implement a rule-based expert system for the daily financial decision making process by using the power of spectral analysis. We use several key...

The purpose of this research is the realistic forecast of volatility in frame of a risk parity class of strategies. The custom rescaling of volatility – naïve risk parity - doesn't consider market inefficiencies which correspond to cyclical patterns like crisis and the following recovery. The...