Operational risk data, when available, are usually scarce, heavy-tailed and possibly dependent. In this work, we introduce a model that captures such real-world characteristics and explicitly deals with heterogeneous pairwise and tail dependence of losses. By considering flexible families of...

Index tracking aims at replicating a given benchmark with a smaller number of its constituents. Different quantitative models can be set up to determine the optimal index replicating portfolio. In this paper, we propose an alternative based on imposing a constraint on the <italic>q</italic>-norm (0 <italic>q</italic> 1) of the...

In designing credit rating systems under the new Basel Accord, considerable effort has been devoted to rating assignment and quantification, while the choice of the optimal bucket structure has received less attention. To fill this gap, we propose two "bucketing" strategies based on constrained...