Implied Portfolio Value-at Risk: model-free and forward-looking risk estimates for investment portfolios

The Value-at-Risk (VaR) is one of the key risk measures to determine the risk levels of trading portfolios. The VaR gives information about the maximal future loss of the portfolio in a given time frame. However, determining a VaR for a given trading portfolio based on historical data of the stocks composing the portfolio results […]

Measuring intra-day systemic risk in high-frequency order books

Measuring the degree of co-movement between stock prices is of utmost importance when dealing with portfolio selection, risk measurement and multivariate derivative pricing/hedging. Daily stock price information is easily accessible for a large number of stocks and indices and allows to calibrate multivariate stock price models. Such a model can then be employed to investigate […]

P2P insurance: risk sharing of heterogeneous risks

The main objective of an insurance contract is to provide an adequate risk sharing scheme between insured and insurer. An insurance contract should allow the insured to make a risk bearable, which would be unbearable without an insurance contract (e.g. the risk of major damage to your house in case of fire). However, other risk […]

Model-free hedging via reinforcement learning

Under the complete market model assumption, risk neutral approach for pricing and hedging financial derivatives have been the standard solution for quite a while. With the rise of machine learning in the past decade, even in an incomplete market, efficient hedging of financial derivatives becomes feasible. This project aims to revisit the two recent groundbreaking […]

Holistic principle for risk aggregation and capital allocation: an extension to Solvency II standard

A novel holistic principle for risk aggregation and capital allocation has recently been proposed in [1], to remedy the issues of lack of consistency, negligence of cost of capital, and disentanglement of allocated capitals from standalone capitals in the state-of-the-art two steps procedure. Astonishingly, the proposed holistic principle provides a natural structural relationship among standalone […]

Cyber risk profile construction via individual cyber losses aggregation – continued

This project is a continuation of the IRisk Lab project, Cyber risk profile construction via individual cyber losses aggregation, in Fall 2019. Multivariate frequency model for cyber losses has been constructed, fitted, and tested, in the previous project. This project aims to further improve the multivariate frequency model, as well as construct the multivariate severity […]

European-type basket option pricing – continued

This project is a continuation of the IRisk Lab project, European-type basket option pricing: independence and comonotonicity approximations with modern machine learning approaches, in Fall 2019. Feedforward neural network (FNN) has been employed in the previous project to revisit the basket option pricing proposed in [1]. This project aims to further improve and investigate modern […]