Knowledge Base

Whitepapers

Machine Learning

Machine learning applications have become more prominent in the financial industry in recent years. Our new article series is exploring the benefits and challenges of using the self-normalizing neural networks (SNNs) for the calculations of the liquidity risk. The first piece of the series introduces the main concepts used in the investigative case study on the Swedish bond market.

LSMC

In the third and concluding article in the ALM using LMSC series, we focus on analyzing the optimal asset allocations in the context of changing asset classes as well as finding the optimal allocation by maximizing the risk-adjusted net asset value. The estimates based on the LSMC method are then compared to the estimates obtained from the full nested Monte Carlo method.

LSMC

The second part of the series exploring the use of Least Squares Monte Carlo in Asset and Liability Management is focused on evaluation of accuracy and performance of this method in comparison to full nested Monte Carlo simulation benchmarks.

Risk

In the first part of the ”Asset and Liability Management using LSMC” article series, we outline an ALM framework based on a replicating portfolio approach along with a suitable financial objective. This ALM framework, albeit simplified, is constructed to provide a straightforward replication of the complex interactions between assets and liabilities. Moreover, a brief introduction to the LSMC method used to generate all underlying risk factors is presented.

Cyber

In continuation of our discussion of cyber risk, this paper investigates the issues of cyber risk management within financial industry. In particular, we look into the process of determining the optimal size of the investments in cyber security as well as the quantification of the appropriate cyber insurance premiums.

Cyber

In continuation of our discussion of cyber risk, this article reviews different methods and models, which can be used to analyse and quantify the risks of information security breaches faced by the contemporary financial industry.

Cyber

This article addresses the topic of cyber risk and different aspects of the mitigation of its adverse effects on financial institutions.

Risk

This article will discuss why it is important to model credit indices and detail a number of different approaches to this problem.

Basel

In this article, we evaluate the rolling window procedure to alleviate the problem of inadequate data by increasing the number of observations extracted from a limited set of data.

CVA

In this article we will expand the concept of CVA by presenting different cases where the investor is seen as either risk-free or risky. We then present four different CVA pricing frameworks and discuss their level of sophistication.

Management Action

In this article, we will focus on how management actions used in an internal SCR model can be evaluated and validated. This will be done from a perspective of both risk and return.

CVA

This article will focus on explaining what CVA is as well as regulatory measures regarding CVA. In later parts of this series, we will describe and evaluate different methods for modelling CVA.

Monte Carlo Simulation

In this part we evaluate the framework by performing simulations and discuss the implications of utilizing a dependence model like this.

Monte Carlo Simulation

In this part we introduce a recognised technique for sophisticated risk modelling, Least-Squares Monte Carlo.

Regression

In this article we will introduce an efficient way of estimating and calibrating regression functions in a LSMC environment.

Hull White

In this article we investigate the performance of the LSMC approach on a stylised financial product.

Dependence

Part I of III describing a framework for analysing dependency between equity and credit risk.

Dependence

In this article we seek to develop a model allowing for dependence between equity and credit risk.

Solvency II

In this article, we will explain what management actions are. Our main focus will be the regulatory requirements on management actions under Solvency II.

CVA

In this article we finalize the CVA series by presenting a case study where the aim is to price the CVA of a vanilla interest rate swap (IRS) using the four different frameworks.

Solvency II

This article is composed of discussions on dynamic hedging and presentation of a case study in order to investigate the impacts of dynamic management actions on Solvency capital requirement.