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Under the new Basel III banking regulation banks should include wrong-way risk (WWR) into the calculation of the credit valuation adjustment (CVA) of the OTC derivatives. WWR takes place when the exposure to a counterparty is adversely correlated with the credit quality of that counterparty....
Persistent link: https://www.econbiz.de/10013023673
State-of-the-art credit risk portfolio models and the new Basel capital Accord consider only symmetric dependencies between borrowers in a portfolio, such as correlations. Recently, asymmetric dependencies have been introduced by Davis & Lo (2001), among others. However, statistical estimation...
Persistent link: https://www.econbiz.de/10013073485
Interest rates are one of the main risk factors for insurance companies. Both assets and liabilities react to the movement of interest rates. Therefore, it is essential to have an adequate model of interest rates for Solvency II applications. Here, we address some of the existing issues under...
Persistent link: https://www.econbiz.de/10012999635
We introduce an additive stochastic mortality model which allows joint modelling and forecasting of underlying death causes. Parameter families for mortality trends can be chosen freely. As model settings become high dimensional, Markov chain Monte Carlo (MCMC) is used for parameter estimation....
Persistent link: https://www.econbiz.de/10012971764
In the present paper we study the dynamics of penalization parameter λ of the least absolute shrinkage and selection operator (Lasso) method proposed by Tibshirani (1996) and extended into quantile regression context by Li and Zhu (2008). The dynamic behaviour of the parameter λ can be...
Persistent link: https://www.econbiz.de/10012979748
In this paper, we extend two general methods of moment (GMM) estimators to panel vector autoregression models (PVAR) with p lags of endogenous variables, predetermined and strictly exogenous variables. We first extend the first difference GMM estimator to this extended PVAR model. Second, we do...
Persistent link: https://www.econbiz.de/10012902456
We develop a network-based vector autoregressive approach to uncover the interactions amongfinancial assets by integrating multiple realized measures based on high-frequency data. Undera restricted parameter structure, our approach allows the capture of cross-sectional and time ependencies...
Persistent link: https://www.econbiz.de/10013233982
The author proposes a test for the parametric specification of each component in the diffusion matrix of a d-dimensional diffusion process. Overall, d (d-1)/2 test statistics are constructed for the off-diagonal components, while d test statistics are constructed for the main diagonal...
Persistent link: https://www.econbiz.de/10010531070
In the present paper we study the dynamics of penalization parameter ? of the least absolute shrinkage and selection operator (Lasso) method proposed by Tibshirani (1996) and extended into quantile regression context by Li and Zhu (2008). The dynamic behaviour of the parameter ? can be observed...
Persistent link: https://www.econbiz.de/10011557306
We extend Donsker's approximation of Brownian motion to fractional Brownian motion with Hurst exponent H∈(0,1) and to Volterra-like processes. Some of the most relevant consequences of our ‘rough Donsker (rDonsker) Theorem' are convergence results for discrete approximations of a large class...
Persistent link: https://www.econbiz.de/10012900532