Risks, Volume 6, Issue 2

The direction of price movements are analysed under an ordered probit framework, recognising the importance of accounting for discreteness in price changes. By extending the work of Hausman et al. (1972) and Yang and Parwada (2012),This paper focuses...

We extend an existing numerical model (Grasselli (2011)) for valuing a real option to invest in a capital project in an incomplete market with a finite time horizon. In doing so, we include two separate effects: the possibility that the project value...

Solvency II Standard Formula provides a methodology to recognise the risk-mitigating impact of excess of loss reinsurance treaties in premium risk modelling. We analyse the proposals of both Quantitative Impact Study 5 and Commission Delegated Regula...

There are extensive studies on the allocation problems in the field of insurance and finance. We observe that these studies, although involving different methodologies, share some inherent commonalities. In this paper, we develop a new framework for...

We study the gap between the state pension provided by the Italian pension system pre-Dini reform and post-Dini reform. The goal is to fill the gap between the old and the new pension by joining a defined contribution pension scheme and adopting an o...

According to the last proposals of the Basel Committee on Banking Supervision, banks or insurance companies under the advanced measurement approach (AMA) must use four different sources of information to assess their operational risk capital requirem...

One of the key components of financial risk management is risk measurement. This typically requires modeling, estimating and forecasting tail-related quantities of the asset returns’ conditional distribution. Recent advances in the financial ec...

It is impossible to discriminate between the commonly used stochastic volatility models of Heston, log-normal, and 3-over-2 on the basis of exponentially weighted averages of daily returns—even though it appears so at first sight. However, with...

Advanced machine learning has achieved extraordinary success in recent years. “Active” operational risk beyond ex post analysis of measured-data machine learning could provide help beyond the regime of traditional statistical analysis whe...

We review recent progress in modeling credit risk for correlated assets. We employ a new interpretation of the Wishart model for random correlation matrices to model non-stationary effects. We then use the Merton model in which default events and los...