We report on progress on a Multistage Stochastic programming model for managing risks in the Danish MBS market. An issuer has the choice between adjustable and fixed rates, both types having various options. An integrated interest-rate and optimization model is needed to manage this complex...

Many supervisory agencies have begun using stress-testing techniques to assess the capital adequacy of individual firms and even national financial systems. In this Economic Letter, I define stress testing, describe its possible applications, highlight certain techniques developed to conduct...

Presentation to Securities Analysts of San Francisco and Global Association of Risk Professionals, San Francisco, CA, October 21, 2004

Presentation to the 18th Annual Hyman P. Minsky Conference on the State of the U.S. and World Economies—“Meeting the Challenges of the Financial Crisis”

Basel II replaces Basel I’s implicit capital charge on operational risk with an explicit charge. Certain U.S. banks concentrated in processing-related business lines – which have significant operational risk – could thus face an increase in overall minimum regulatory capital requirements....

Public–private partnerships (PPPs) allow private companies to build, own and operate public projects such as schools and hospitals on behalf of the public sector. PPP contracts commonly require the private agent to take responsibilities for the performance of the asset over a long term, at...

This paper studies options on the minimum/maximum of two average prices. We provide a closed-form pricing formula for the option with geometric averaging starting at any time before maturity. We show overwhelming numerical evidence that the variance reduction technique with the help of the above...