In this paper, we explore the Loss Distribution Approach (LDA) for computing the capital charge of a bank for operational risk where LDA refers to statistical/actuarial methods for modelling the loss distribution. In this framework, the capital charge is calculated using a Value-at-Risk measure....

In this paper, we consider the use of interest rate contingent claims as indicators for the monetary policy. We analyze two approaches: one based on the term structure of zero bonds and another based on interest-rate option derivatives. We show how traditional tools based on the Black framework...

Minimum variance and equally-weighted portfolios have recently prompted great interest both from academic researchers and market practitioners, as their construction does not rely on expected average returns and is therefore assumed to be robust. In this paper, we consider a related approach,...

"Developed over 20 years of teaching academic courses, the Handbook of Financial Risk Management can be divided into two main parts: risk management in the financial sector; and a discussion of the mathematical and statistical tools used in risk management. This comprehensive text offers readers...

Intense reflections are being conducted at the moment regarding the way to pool heterogeneous data coming from both banks' internal systems and industry-pooled databases. We propose here a sound methodology. As it relies on maximum likelihood principle, it is thus statistically rigorous and...

Copula functions have been introduced recently in finance. They are a general tool to construct multivariate distributions and to investigate dependence structure between random variables. In this paper, we show that copula functions may be extensively used to solve many financial problems. As...

This paper demonstrates that aggregate losses are necessarily low as long as we remain under the standard assumptions of LDA models. Moreover empirical findings show that the correlation between two aggregate losses is typically below 5%, which opens a wide scope for large diversification...

This paper follows the different steps necessary for implementing a LDA in practice: - Step 1: Severity Estimation - Step 2: Frequency Estimation - Step 3: Capital Charge Computations - Step 4: Confidence Interval - Step 5: Self Assessment and Scenario Analysis For each of these steps, we try to...

The momentum risk premium is one of the most important alternative risk premia alongside the carry risk premium. However, it appears that it is not always well understood. For example, is it an alpha or a beta exposure? Is it a skewness risk premium or a market anomaly? Does it pursue a...

This handbook in Sustainable Finance corresponds to the lecture notes of the course given at University Paris-Saclay, ENSAE, Sorbonne University and Paris Cité University. It covers the following chapters: 1. Introduction, 2. ESG Scoring, 3. Financial Performance of ESG Investing, 4....