Special Issue "Model Risk in Finance"

A special issue of Risks (ISSN 2227-9091).

Deadline for manuscript submissions: 30 April 2019

Special Issue Editor

Guest Editor
Prof. Dr. Rolf Poulsen

Department of Mathematical Sciences, University of Copehagen
Website | E-Mail
Interests: Interest rate, exchange rate and volatility modelling, Optimal portfolio choice for pensions and mortgages, Model risk

Special Issue Information

Dear Colleagues,

Financial model risk analysis attacks a question that is both simple and complex: What happens if we use the wrong model or if use the model incorrectly? Paradoxically put, this is a question that we simultaneously both cannot answer and cannot not answer.

This Special Issue aims to compile high quality papers that offer a discussion of the state-of-the-art or introduce new theoretical or practical developments in this area. We welcome papers related, but not limited to, the following topics:

- Out-of-sample performance time- and product-wise of different models calibrated to the same instruments; it could be extensions of the analyses in for instance Schoutens, Simons & Tistaert (2004) and Jessen, & Poulsen (2013).

- The effects uncertainty/ambiguity from both axiomatic and practical angles and for both derivative pricing (as for instance Cont (2007)) and optimal portfolio choice (as for instance in Garlappi, Uppal & Wang (2007)).

- Regulatory aspects of model risk in light of Federal Reserve Supervisory Letter SR 11-7 in which ‘model’ is used in a broader sense than is otherwise common among readers of this journal.

Prof. Dr. Rolf Poulsen
Guest Editor

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All papers will be peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Risks is an international peer-reviewed open access quarterly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • model risk
  • calibration
  • option pricing
  • out-of-sample-performance
  • uncertainty
  • ambiguity
  • portfolio choice
  • Supervisory Letter SR 11-7

Published Papers (1 paper)

View options order results:
result details:
Displaying articles 1-1
Export citation of selected articles as:

Research

Open AccessArticle Bail-In or Bail-Out? Correlation Networks to Measure the Systemic Implications of Bank Resolution
Received: 28 November 2018 / Revised: 22 December 2018 / Accepted: 27 December 2018 / Published: 5 January 2019
PDF Full-text (1634 KB) | HTML Full-text | XML Full-text
Abstract
We propose a statistical measure, based on correlation networks, to evaluate the systemic risk that could arise from the resolution of a failing or likely-to-fail financial institution, under three alternative scenarios: liquidation, private recapitalization, or bail-in. The measure enhances the observed CDS spreads [...] Read more.
We propose a statistical measure, based on correlation networks, to evaluate the systemic risk that could arise from the resolution of a failing or likely-to-fail financial institution, under three alternative scenarios: liquidation, private recapitalization, or bail-in. The measure enhances the observed CDS spreads with a risk premium that derives from contagion effects across financial institutions. The empirical findings reveal that the recapitalization of a distressed bank performed by the other banks in the system and the bail-in resolution minimize the potential losses for the banking sector with respect to the liquidation scenario, thus posing limited systemic risks. A closer comparison between the private intervention recapitalization and the bail-in tool shows that the latter slightly reduces contagion effects with respect to the private intervention scenario. Full article
(This article belongs to the Special Issue Model Risk in Finance)
Figures

Figure 1

Risks EISSN 2227-9091 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
Back to Top