Technical paper/Modelling
Financial distress prediction with optimal decision trees based on the optimal sampling probability
The authors propose and validate a tree-based ensemble model for financial distress prediction which is demonstrated to outperform comparative models.
Estimating the probability of insurance recovery in operational risk
Forecasting the default risk of Chinese listed companies using a gradient-boosted decision tree based on the undersampling technique
A two-stage nonlinear approach for modeling hourly spot power prices with an application to spot market risk valuation of the power yield of a solar array in Germany
The factor Heath-Jarrow-Morton term structure
A framework for rates that links real-world and risk-neutral measures is presented
Instabilities in Cox proportional hazards models in credit risk
The authors explore possible instabilities in applying Cox PH models and conduct numerical studies to demonstrate the same linear specification error from APC models an occur in Cox PH estimation.
Value-at-risk models: a systematic review of the literature
The authors conduct a systematic literature review of value-at-risk models to determine which models are most often used and whether any change in model popularity occurred after the 2007-9 financial crisis.
Modeling maxima with a regime-switching Fréchet model
The authors identify a regime-switching Fréchet model which can be used to identify the behavior of extreme values in financial series.
Modeling very large losses. II
This paper presents a means to estimate very large losses by supposing the event is the result of a succession of factors and estimating the probability of each factor.
Analytical conversion between implied volatilities based on different dividend models
The authors propose an explicit formula for the conversion of implied volatilities corresponding to dividend modelling assumptions which covers a wide range of strikes and maturities.
An effective credit rating method for corporate entities using machine learning
The authors propose a new method to design credit risk rating models for corporate entities using a meta-algorithm which exploits information embedded in expert-assigned credit ratings to rank customers.
Optimal exercise of callable bonds
Citi quants and structurers present a term-structure model for callable bonds' work
A general firm value model under partial information
The authors propose a general structural default model combining enhanced economic relevance and affordable computational complexity.
Ruin problems in a discrete risk model in a Markovian environment
This paper finds that the derivations in a previous paper by Yang et al (2019) are erroneous, and analyzes the risk model model correctly using the matrix analytic method.
Strong-hand conjecture: agent-based numerical simulation
Following the example of the Kim–Markowitz model, this study adopts similar mechanisms of market operation to perform computer simulations based on agent modeling on the financial market, where shares of one company and a bank account are available …
Black basket analytics for mid-curves and spread options
A new solution to calibrate derivatives with multiple strikes is proposed
NLP and transformer models for credit risk
News feeds are factored into models to predict credit events
Sign prediction and sign regression
This paper proposes an approach whereby the loss function regularizes the errors in prediction in different ways.
A verification model to capture option risk and hedging based on a modified underlying beta
This paper analyzes the relationship between option risk and expected return from the perspective of the underlying beta, and estimates the degree of correlation.
The impact of energy costs on industrial performance: identifying price and quantity effects in the aluminum industry using a data envelopment analysis approach
The authors build a frontier function model with technical and cost efficiency measures to assess the impact of energy costs on competitiveness in the aluminum industry, a heavy energy consumer, by identifying what may be attributed to price and quantity…
Determination of weights for an optimal credit rating model based on default and nondefault distance maximization
This study proposes a credit rating model that accurately identifies default and nondefault companies by maximizing intergroup credit score deviations and minimizing intragroup deviations.
How accurate is the accuracy ratio in credit risk model validation?
The author presents four methods to estimate the sample variance of the accuracy ratio and the area under the curve.
Body and tail: an automated tail-detecting procedure
The quality of a tail model, which is determined by data from an unknown distribution, depends critically on the subset of data used to model the tail. Based on a suitably weighted mean square error, the authors present a completely automated method that…
Standard errors of risk and performance estimators for serially dependent returns
In this paper, a new method for computing the standard errors (SEs) of returns-based risk and performance estimators for serially dependent returns is developed.