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Risk Management & Analysis in Financial Institutions eJournal最新文献

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Clearing Financial Networks: Impact on Equilibrium Asset Prices and Seniority of Claims 清算金融网络:对均衡资产价格和债权优先级的影响
Risk Management & Analysis in Financial Institutions eJournal Pub Date : 2020-06-28 DOI: 10.2139/ssrn.3632454
H. Amini, Andreea Minca
{"title":"Clearing Financial Networks: Impact on Equilibrium Asset Prices and Seniority of Claims","authors":"H. Amini, Andreea Minca","doi":"10.2139/ssrn.3632454","DOIUrl":"https://doi.org/10.2139/ssrn.3632454","url":null,"abstract":"In financial derivatives networks clearinghouses have been mandated as de facto central nodes: they are buyers to the sellers of financial contracts and resellers to the ultimate buyers. Other services aim at solving various network problems such as reducing cycles. All these services face complex challenges, ranging from the direct effect on the network topology to the indirect effects on asset prices and on the end users. \u0000 \u0000In this tutorial, we offer an introduction into the quantitative modeling of clearing systems. We analyze joint equilibria for the network payments and the asset prices. We raise two main points that have received less attention in the literature. The first point is that an equilibrium price for the asset prices may not be achieved in a general payment network. The second point is that trade-compression and clearinghouses modify the seniority structure in the network, and end users that are not part of multi-lateral clearing arrangements become de facto junior. The comprehensive study of these issues with operations research tools would lead to a promising research agenda.","PeriodicalId":251522,"journal":{"name":"Risk Management & Analysis in Financial Institutions eJournal","volume":"13 4","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114043240","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 4
Generalizing Geometric Brownian Motion with Bouncing 具有弹跳的几何布朗运动的概化
Risk Management & Analysis in Financial Institutions eJournal Pub Date : 2020-06-27 DOI: 10.2139/ssrn.3636664
A. Khalaf
{"title":"Generalizing Geometric Brownian Motion with Bouncing","authors":"A. Khalaf","doi":"10.2139/ssrn.3636664","DOIUrl":"https://doi.org/10.2139/ssrn.3636664","url":null,"abstract":"The trajectories of particles moving in a real line and following the Geometrical Brownian motion have been studied. We take processes and give the generalization of the notions, descriptions and models of Geometrical Brownian motion with bouncing. Moreover, we derive the formulas, which enable us to know the time and positions of the meeting for each pair in the considered collections of particles. We provide important results that show the trajectories of the particles at and after the stopping times. Furthermore, we define the super couple, which achieves the highest number of meetings among all the pairs in the collections. Finally, for a spatial case of our model, we generate the joint distribution of the time between the successive meeting of the bouncing Geometric Brownian motion with bouncing and the change between the positions of the consecutive meeting, which will enable us to predict the next times and positions for the meetings in the future.","PeriodicalId":251522,"journal":{"name":"Risk Management & Analysis in Financial Institutions eJournal","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123630902","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Systemic Portfolio Diversification 系统性投资组合多样化
Risk Management & Analysis in Financial Institutions eJournal Pub Date : 2020-06-24 DOI: 10.2139/ssrn.3345399
A. Capponi, Marko H. Weber
{"title":"Systemic Portfolio Diversification","authors":"A. Capponi, Marko H. Weber","doi":"10.2139/ssrn.3345399","DOIUrl":"https://doi.org/10.2139/ssrn.3345399","url":null,"abstract":"We study the portfolio choice problem of banks, taking into account losses due to fire-sale spillovers. We show that the optimal asset allocation can be recovered as the unique Nash equilibrium of a potential game. Our analysis highlights the key tradeoff between individual diversification and systemic risk. In a stylized model economy featuring two banks and two assets, we show that sacrificing individual diversification to reduce portfolio commonality increases the likelihood of a sale event, while simultaneously decreasing the probability of a costly systemic sell-off. Banks have stronger incentives to achieve systemic diversification if there is more heterogeneity in leverage among them, leading to a decrease in the overall vulnerability of the system. We provide numerical evidence that our conclusions are robust with respect to the number of banks and assets in the system. Funding: The research of A. Capponi has been supported by the NSF/CMMI CAREER-1752326 award. The research of M. Weber has been supported by the NUS Start-Up Grant [A-0004587-00-00].","PeriodicalId":251522,"journal":{"name":"Risk Management & Analysis in Financial Institutions eJournal","volume":"40 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115525364","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 6
Credit Default Swaps and Bank Regulatory Capital 信用违约掉期和银行监管资本
Risk Management & Analysis in Financial Institutions eJournal Pub Date : 2020-06-08 DOI: 10.2139/ssrn.3038730
Chenyu Shan, Dragon Yongjun Tang, Hongjun Yan, Xing (Alex) Zhou
{"title":"Credit Default Swaps and Bank Regulatory Capital","authors":"Chenyu Shan, Dragon Yongjun Tang, Hongjun Yan, Xing (Alex) Zhou","doi":"10.2139/ssrn.3038730","DOIUrl":"https://doi.org/10.2139/ssrn.3038730","url":null,"abstract":"We illustrate how banks use financial innovations to evade regulations in the case of credit default swaps (CDS). We document that the amount of total assets increases after banks begin using CDS, but their risk-weighted assets shrink. Banks use CDS to synthetically shift assets from higher risk-weight categories to the 0%-risk category. As a result, these banks are able to hold less capital, in particular core equity capital, while complying with the requirements of regulatory capital ratios. Our findings suggest that, apart from the risk management motives of using credit derivatives, regulatory capital relief is an important driver for the prolific financial innovations that banks constantly engage in. Such derivatives activities can reduce the effectiveness of bank regulations.","PeriodicalId":251522,"journal":{"name":"Risk Management & Analysis in Financial Institutions eJournal","volume":"236 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122954536","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 12
Crude Oil Price Dynamics with Crash Risk Under Fundamental Shocks 基本面冲击下原油价格走势与崩盘风险
Risk Management & Analysis in Financial Institutions eJournal Pub Date : 2020-06-04 DOI: 10.2139/ssrn.3550929
C. Hui, C. Lo, Chi-Hin Cheung, Andrew Wong
{"title":"Crude Oil Price Dynamics with Crash Risk Under Fundamental Shocks","authors":"C. Hui, C. Lo, Chi-Hin Cheung, Andrew Wong","doi":"10.2139/ssrn.3550929","DOIUrl":"https://doi.org/10.2139/ssrn.3550929","url":null,"abstract":"Abstract Our paper presents a crude oil price model in which the price is confined in a wide moving band. A price crash occurs when the price breaches the lower boundary where a smooth-pasting condition is imposed. Using an asymmetric mean-reverting fundamental (supply/demand) shock, the solution derived from the oil price equation for the model shows the oil price follows a mean-reverting square-root process, which is quasi-bounded at the boundary. The oil price dynamics generates left-skewed price distributions consistent with empirical observations. A weakened mean-reverting force for the price increases the probability leakage for the price across the boundary and the risk of a price crash. The empirical results show the oil price dynamics can be calibrated according to the model, where the mean reversion of the price dynamics is positively co-integrated with the oil production reaction to negative demand shocks, and with the risk reversals of the commodity currencies, the Canadian dollar and the Australian dollar in currency option markets. The results are consistent with an increased price crash risk with negative demand shocks and negative risk reversals. The forecasting performance of the oil price model is better than the futures-spread models and random walk models during the crash periods. While the price of oil was above the lower boundary for most of the time, the conditions for breaching the boundary were met in 2008 and 2014 when the price fell sharply.","PeriodicalId":251522,"journal":{"name":"Risk Management & Analysis in Financial Institutions eJournal","volume":"48 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116813154","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 5
Crisis Date Identification and Testing for Contagion across Stock Markets 危机日期的识别和跨股票市场传染的测试
Risk Management & Analysis in Financial Institutions eJournal Pub Date : 2020-06-03 DOI: 10.2139/ssrn.3618011
Oladunni Adesanya
{"title":"Crisis Date Identification and Testing for Contagion across Stock Markets","authors":"Oladunni Adesanya","doi":"10.2139/ssrn.3618011","DOIUrl":"https://doi.org/10.2139/ssrn.3618011","url":null,"abstract":"This paper studies whether the choice of the crisis start dates affects the magnitude of contagion estimates. Contagion models generally use exogenously determined crisis start date by relying on event-based markers. We conduct structural break tests and endogenously determine the start dates of the global financial crisis for markets in three regions. We then estimate models with regime switching that incorporates these start dates to test for contagion. We present evidence in favour of contagion through correlation and coskewness. Finally, we evaluate whether there are differences in estimates based on contagion models with exogenously or endogenously determined crisis start dates. We find that there are substantial differences in estimates and that the estimation error in correlation is trivial, but enormous for coskewness. We show that properly identifying the crisis start date through econometric tests is crucial for avoiding potential bias from sample selection and estimation errors induced by this bias.","PeriodicalId":251522,"journal":{"name":"Risk Management & Analysis in Financial Institutions eJournal","volume":"80 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124323129","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Why Do Models that Predict Failure Fail? 为什么预测失败的模型会失败?
Risk Management & Analysis in Financial Institutions eJournal Pub Date : 2020-06-02 DOI: 10.2139/ssrn.3616889
Hua Kiefer, Tom Mayock
{"title":"Why Do Models that Predict Failure Fail?","authors":"Hua Kiefer, Tom Mayock","doi":"10.2139/ssrn.3616889","DOIUrl":"https://doi.org/10.2139/ssrn.3616889","url":null,"abstract":"In the first portion of this paper, we utilize millions of loan-level servicing records for mortgages originated between 2004 and 2016 to study the performance of predictive models of mortgage default. We find that the logistic regression model -- the traditional workhorse for consumer credit modeling -- as well as machine learning methods can be very inaccurate when used to predict loan performance in out-of-time samples. Importantly, we find that this model failure was not unique to the early-2000s housing boom.<br><br>We use the Panel Study of Income Dynamics in the second part of our paper to provide evidence that this model failure can be attributed to intertemporal heterogeneity in the relationship between variables that are frequently used to predict mortgage performance and the realized post-origination path of variables that have been shown to trigger mortgage default. Our findings imply that model instability is a significant source of risk for lenders, such as financial technology firms (\"Fintechs\"), that rely heavily on predictive statistical models and machine learning algorithms for underwriting and account management.","PeriodicalId":251522,"journal":{"name":"Risk Management & Analysis in Financial Institutions eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130188679","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 2
Challenging Risk-Neutrality, Reinforcement Learning for Options Pricing in Indian Options market 挑战风险中性:印度期权市场期权定价的强化学习
Risk Management & Analysis in Financial Institutions eJournal Pub Date : 2020-06-01 DOI: 10.2139/ssrn.3917860
D. Mahajan
{"title":"Challenging Risk-Neutrality, Reinforcement Learning for Options Pricing in Indian Options market","authors":"D. Mahajan","doi":"10.2139/ssrn.3917860","DOIUrl":"https://doi.org/10.2139/ssrn.3917860","url":null,"abstract":"This thesis aims to challenge the controversial yet common assumption of Risk- Neutrality in much of the Options pricing literature. Traditional Options pricing methods assume perfect hedge portfolio in a risk-neutral world which leads to a paradoxical conclusion that Options themselves are redundant, since Options trading is a trillion dollar market that clearly is not the case. This thesis presents an alternative method using Reinforcement Learning that relaxes the assumption on risk-neutrality and perfect hedging. A risk-sensitive discrete-time Markov Decision Process is created for the hedge portfolio which allows for imperfect hedging. The hedge portfolio consists of cash and position in underlying which is taken to be the action variable for the RL setting. A value function for the RL setting is created as the ask Options price which deviates from the risk-neutral fair price and incorporates risk associated with the option in form of discounted variance of the hedge portfolio. Further steps include calculation of the optimal action and using it to solve the Bellman Optimality condition for the Value function to obtain at the Options price. The model is empirically tested on 37 most liquid Option issuers on NSE with varying strikes and maturities accumulating to a total of 324 different Option contracts. Results show that the Reinforcement Learning model significantly outperforms the Black-Scholes model wrt actual NSE traded prices with an overall scaled RMSE of 8.34% vs 12.28% for the BS model. Also, the RL model shows a better performance in 29 of the total 37 Option issuers.","PeriodicalId":251522,"journal":{"name":"Risk Management & Analysis in Financial Institutions eJournal","volume":"54 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125871562","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Which Investors Matter for Equity Valuations and Expected Returns? 哪些投资者对股票估值和预期回报重要?
Risk Management & Analysis in Financial Institutions eJournal Pub Date : 2020-06-01 DOI: 10.2139/ssrn.3378340
R. Koijen, Robert J. Richmond, Motohiro Yogo
{"title":"Which Investors Matter for Equity Valuations and Expected Returns?","authors":"R. Koijen, Robert J. Richmond, Motohiro Yogo","doi":"10.2139/ssrn.3378340","DOIUrl":"https://doi.org/10.2139/ssrn.3378340","url":null,"abstract":"\u0000 Based on an asset demand system, we develop a framework to quantify the impact of market trends and changes in regulation on asset prices, price informativeness, and the wealth distribution. Our leading applications are the transition from active to passive investment management and climate-induced shifts in asset demand. The transition from active to passive investment management had a large impact on equity prices but a small impact on price informativeness because capital did not flow from more to less informed investors on average. This finding is based on a new measure of investor-level informativeness that identifies which investors are more informed about future profitability. Climate-induced shifts in asset demand have a potentially large impact on equity prices and the wealth distribution, implying capital gains for passive investment advisors, pension funds, insurance companies, and private banking and capital losses for active investment advisors and hedge funds.","PeriodicalId":251522,"journal":{"name":"Risk Management & Analysis in Financial Institutions eJournal","volume":"34 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115117830","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 54
Optimal Reinsurance with Multiple Reinsurers: Distortion Risk Measures, Distortion Premium Principles, and Heterogeneous Beliefs 多再保险人的最优再保险:失真风险度量、失真保费原则和异质信念
Risk Management & Analysis in Financial Institutions eJournal Pub Date : 2020-06-01 DOI: 10.2139/ssrn.3475657
T. Boonen, Mario Ghossoub
{"title":"Optimal Reinsurance with Multiple Reinsurers: Distortion Risk Measures, Distortion Premium Principles, and Heterogeneous Beliefs","authors":"T. Boonen, Mario Ghossoub","doi":"10.2139/ssrn.3475657","DOIUrl":"https://doi.org/10.2139/ssrn.3475657","url":null,"abstract":"Abstract This paper unifies the work on multiple reinsurers, distortion risk measures, premium budgets, and heterogeneous beliefs. An insurer minimizes a distortion risk measure, while seeking reinsurance with finitely many reinsurers. The reinsurers use distortion premium principles, and they are allowed to have heterogeneous beliefs regarding the underlying probability distribution. We provide a characterization of optimal reinsurance indemnities, and we show that they are of a layer-insurance type. This is done both with and without a budget constraint, i.e., an upper bound constraint on the aggregate premium. Moreover, the optimal reinsurance indemnities enable us to identify a representative reinsurer in both situations. Finally, two examples with the Conditional Value-at-Risk illustrate our results.","PeriodicalId":251522,"journal":{"name":"Risk Management & Analysis in Financial Institutions eJournal","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124310750","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 12
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