We propose a set of conservative models in which agents exchange wealth with a preference in the choice of interacting agents in different ways. The common feature in all the models is that the temporary values of financial status of agents is a deciding factor for interaction. Other factors...

In this paper we discuss a general methodology to compute the market risk measure over long time horizons and at extreme percentiles, which are the typical conditions needed for estimating Economic Capital. The proposed approach extends the usual market-risk measure, ie, Value-at-Risk (VaR) at a...

This work uses the stocks of the 197 largest companies in the world, in terms of market capitalization, in the financial area in the study of causal relationships between them using Transfer Entropy, which is calculated using the stocks of those companies and their counterparts lagged by one...

This paper studies the utility maximization problem on consumption with addictive habit formation in the market with proportional transaction costs and unbounded random endowment. To model the proportional transaction costs, we adopt the Kabanov's multi-asset framework with a cash account. At...

The structure of return spillovers is examined by constructing Granger causality networks using daily closing prices of 20 developed markets from 2nd January 2006 to 31st December 2013. The data is properly aligned to take into account non-synchronous trading effects. The study of the resulting...

We present and analyze a central cutting surface algorithm for general semi-infinite convex optimization problems, and use it to develop a novel algorithm for distributionally robust optimization problems in which the uncertainty set consists of probability distributions with given bounds on...

The hybrid Monte Carlo algorithm (HMCA) is applied for Bayesian parameter estimation of the realized stochastic volatility (RSV) model. Using the 2nd order minimum norm integrator (2MNI) for the molecular dynamics (MD) simulation in the HMCA, we find that the 2MNI is more efficient than the...

Financial portfolios are often optimized for maximum profit while subject to a constraint formulated in terms of the Conditional Value-at-Risk (CVaR). This amounts to solving a linear problem. However, in its original formulation this linear problem has a very large number of linear constraints,...

The purpose of this paper is to identify a relevant statistical correlation between rate of default, RD, and loss given default, LGD, in a major Brazilian financial institution Retail Home Equity exposure rated using the IRB approach, so that we may find a causal relationship between the two...

Central Counterparties (CCPs) are widely promoted as a requirement for safe banking with little dissent except on technical grounds (such as proliferation of CCPs). Whilst CCPs can have major operational positives, we argue that CCPs have many of the business characteristics of Rating Agencies,...