Original research
A simple approximation for the no-arbitrage drifts in Libor market model–SABR-family interest-rate models
This paper presents a simple approximation for the noarbitrage drifts that appear in Libor market model SABR-family term structure models.
Indexing multi-asset solutions
This paper explores the potential role of multi-asset solutions in the indexing landscape as well as challenges in constructing multi-asset indexes
Commodity value-at-risk modeling: comparing RiskMetrics, historic simulation and quantile regression
The authors of this paper investigate the risk modeling of commodities. They note that return distributions differ widely across different commodities, both in terms of tail fatness and skewness.
Exploring shipping inefficiencies in global liquified natural gas trade patterns
The authors examine GPS-communicated data on liquefied natural gas (LNG) tanker movements between January 2011 and August 2012 to determine the possible drivers of apparently inefficient shipping routes from producing to consuming countries.
A combined regime-switching and Black–Litterman model for optimal asset allocation
The authors of this paper aim to test empirically the performance of several optimization algorithms that exist in the literature and then compare them, in both a single-regime market and a two-regime market.
Communities and driver nodes in the TARGET2 payment system
This paper first describes T2 by means of classic network measures. Then, it applies novel methods developed in network theory to uncover two additional features of T2: driver nodes and communities.
Stress testing and modeling of rating migration under the Vasicek model framework: empirical approaches and technical implementation
This paper is concerned with stress testing the Vasicek model by extending the correlation structure for nondefault ratings. Two models are proposed.
Are world natural gas markets moving toward integration? Evidence from the Henry Hub and National Balancing Point forward curves
The authors of this paper investigate whether the US and UK gas markets are moving toward integration. As well as looking at the cointegration of the Henry Hub and National Balancing Point indexes, the authors also introduce the novel concept of…
A dynamic approach to intraday liquidity needs
This paper studies the intraday liquidity needs of systemically important entities using simulations of the various Colombian financial market infrastructures (FMIs). The paper shows that if liquidity in another FMI (based on the proprietary positions of…
Transmission of shocks in the integrated accounting framework
This paper develops a framework based on integrated national accounting data that aims to capture linkages between different sectors of the economy. The resulting framework provides a useful platform for static policy simulations and shock transmission…
Backtesting Solvency II value-at-risk models using a rolling horizon
The author of this paper performs an analysis on a review of the equity stress parameter for Dutch pension funds.
The global network of payment flows
This paper considers a network of cross-border SWIFT message flows where nodes are the countries in which the sending and receiving banks are domiciled. The authors analyze how the payment flows reflect or predict various aspects of the real economies.
Granger-causal nonlinear financial networks
This paper aims to quantify cascades of price movements in financial markets. It considers nonlinear lead-lag effects with stocks in the S&P 100 as nodes, and it also looks at directed links between the stocks identified through Granger causality. The…
Biased benchmarks
The authors of this paper contend that recent evidence indicates that benchmarks have, over the last eleven years, exaggerated default risk for nonfinancial corporate entities.
Price determinants in the German intraday market for electricity: an empirical analysis
This paper looks at hourly electricity prices, specifically in the German intraday market and is one of the first German studies to develop significant intraday estimates of the driving factors, as distinct from day-ahead modeling.
Bayesian operational risk models
This paper proposes a methodology to frame risk self-assessment data into suitable prior distributions that can produce posterior distributions from which accurate operational risk measures.
Day-ahead forward premiums in the Texas electricity market
This paper looks at forward and spot market-price convergence in the competitive Texas electricity market in the presence of large-scale wind generation.
Trend detection under erroneous observations: application to quantitative financial strategies
This paper shows how to handle the problem of trend detection in the context of trend-following trading strategies, when the data is potentially erroneous. The questions raised in this paper are important for many commodity trading advisors, and more…
Numerical valuation of derivatives in high-dimensional settings via partial differential equation expansions
This paper presents a new numerical approach to solving high-dimensional partial differential equations that arise in the valuation of exotic derivative securities. The resulting numerical solutions are carefully compared in terms of accuracy and run…
Default predictors in credit scoring: evidence from France’s retail banking institution
This paper presents the set-up of a behavioral credit-scoring model, and estimates such a model using an auto loan data set of one of the largest multinational financial institutions based in France.
A simple, transparent and rational weighting approach to combining different operational risk data sources
The authors propose a generic weighting function based on a nonparametric approach that can be used to weight the different distributions.
Notes on alpha stream optimization
This paper discusses aspects of optimizing weights for alpha streams (by alpha streams the author means a sequence of predictions of expected returns for each asset given by different models employed by portfolio managers).
Systematic risk and yield premiums in the bond market
This paper develops a method for estimating the full systematic risk of bonds and thereby enables a fuller understanding of the risk and return on fixed-income instruments.
Approximations of value-at-risk as an extreme quantile of a random sum of heavy-tailed random variables
The authors of this paper study the approximation of extreme quantiles of random sums of heavy-tailed random variables. More specifically, sub-exponential random variables.