Stress testing of financial systems has been increasingly important after several financial crises in recent years, thereby drawing keen attention to the choice of appropriate stress scenarios to effectively test the robustness of the systems. To this end, we consider the problem of identifying...

Given limited network information, we consider robust risk quantification under the Eisenberg-Noe model for financial networks. To be more specific, motivated by the fact that the structure of the interbank network is not completely known in practice, we propose a robust optimization approach to...

This paper documents that median holding period in structured products based on market index is less than a day from initial purchase to liquidation even for retail investors. Less than 6% of all series ever traded by retail investors are held until maturity. More importantly, buy-and-hold...

We consider an ordinal optimization problem, where a decision maker learns the statistical characteristics of a number of systems using sequential sampling in order to ultimately determine the "best" one (with high probability). In so doing, the decision maker postulates a parametric model which...

We consider the problem of estimating the expectation over a convex polyhedron specified by a set of linear inequalities. This problem encompasses a multitude of financial applications including systemic risk quantification, exotic option pricing, and portfolio management. We particularly focus...

This paper considers multi-dimensional affine processes with continuous sample paths. By analyzing the Riccati system, which is associated with affine processes via the transform formula, we fully characterize the regions of exponents in which exponential moments of a given process do not...

This study provides a systematic and unified approach for constructing exact and staticreplications for exotic options, using the theory of integral equations. In particular, we focus onbarrier-type options including standard, double and sequential barriers. Our primary approachto static options...

We derive an explicit representation of the transitions of the Heston stochastic volatility model and use it for fast and accurate simulation of the model. Of particular interest is the integral of the variance process over an interval, conditional on the level of the variance at the endpoints....

This paper analyzes risk management contracts used to handle currency risk in a decentralized supply chain that consists of risk-averse divisions in a multinational firm. Particular contracts of interest involve transferring risk to a third party by using risk-transfer contracts such as currency...