scholarly journals Deep calibration of financial models: turning theory into practice

2021 ◽  
Author(s):  
Patrick Büchel ◽  
Michael Kratochwil ◽  
Maximilian Nagl ◽  
Daniel Rösch
Keyword(s):  
Neural Networks ◽  
Financial Institutions ◽  
Model Calibration ◽  
Financial Models ◽  
Financial Institution ◽  
Real Life ◽  
Model Parameters ◽  
Practical Application ◽  
Business Decisions ◽  
Over Time

AbstractThe calibration of financial models is laborious, time-consuming and expensive, and needs to be performed frequently by financial institutions. Recently, the application of artificial neural networks (ANNs) for model calibration has gained interest. This paper provides the first comprehensive empirical study on the application of ANNs for calibration based on observed market data. We benchmark the performance of the ANN approach against a real-life calibration framework that is in action at a large financial institution. The ANN based calibration framework shows competitive calibration results, roughly four times faster with less computational efforts. Besides speed and efficiency, the resulting model parameters are found to be more stable over time, enabling more reliable risk reports and business decisions. Furthermore, the calibration framework involves multiple validation steps to counteract regulatory concerns regarding its practical application.

A practical process mining approach for compliance management

2019 ◽  
Vol 27 (4) ◽  
pp. 464-478
Author(s):  
Michael Becker ◽  
Rüdiger Buchkremer
Keyword(s):  
Risk Management ◽  
Financial Institutions ◽  
Data Privacy ◽  
Process Mining ◽  
Financial Institution ◽  
Real Life ◽  
Practical Implementation ◽  
Process Data ◽  
Content Type ◽  
Compliance Management

Purpose The purpose of this study is to examine whether the compliance management activities in the risk management environment of financial institutions can be enhanced using a Process Mining application. Design/methodology/approach In this research, an implementation procedure for a selected Process Mining application is developed and evaluated at a financial institution in Germany. Findings The evaluation of the process data with the Process Mining application Disco shows that the compliance of the real-life execution of business processes can be monitored in real-time. Moreover, potential non-compliant activities and durations can be analysed in a detailed manner. Research limitations/implications When the research results are regarded, it must be considered that a general condition for the usage of a Process Mining application is that the process data is available and exportable in the required format and that data privacy regulations are fulfilled. Originality/value This research presents a practical use case for the implementation of a Process Mining application at the risk management department of financial institutions. It shows the value of using a technical application to carry out tedious tasks that are usually executed manually. This value is discussed and compared with the aim to help financial institutions in determining how the effectiveness and efficiencies of compliance management activities can be improved. Therefore, this research can be taken as a foundation for the practical implementation of a Process Mining application at financial institutions.

scholarly journals A SUCCINCT ANALYSIS OF MITIGATING LIQUIDITY RISK IN ISLAMIC BANKS IN THE LIGHT OF LIQUIDITY AND RISK MANAGEMENT PRINCIPLES

2019 ◽  
Vol 4 (1) ◽  
pp. 527
Author(s):  
Atharyanshah Puneri ◽  
Naeem Suleman Dhiraj ◽  
Hafiz Benraheem
Keyword(s):  
Risk Management ◽  
Financial Institutions ◽  
Financial Institution ◽  
Real Life ◽  
Liquidity Risk ◽  
Islamic Banks ◽  
Liquidity Management ◽  
Islamic Financial Institutions ◽  
The Subject ◽  
Key Aspects

Liquidity management has been incessantly challenging for the financialinstitutions and especially Islamic financial institutions due to their nature of business. The�convoluted nature of liquidity management impedes the task of Islamic banks in managing�their liquidity efficiently. Given the intricacies of the subject matter, this paper delves into�elaborating the key aspects of liquidity management; subsequently, discusses the�consequences of poor liquidity management and problems inherent in managing the latter by�analyzing the real-life failure of Islamic financial institution as a result identifying the issues that could possibly jeopardize the existence of the Islamic banks. Finally, equipping the�readers with tools to mitigate the liquidity risk.

Adjusting a subject-specific time of event in longitudinal studies

2019 ◽  
Vol 29 (7) ◽  
pp. 1787-1798
Author(s):  
Hyunkeun Ryan Cho ◽  
Seonjin Kim ◽  
Myung Hee Lee
Keyword(s):  
Goodness Of Fit ◽  
Real Life ◽  
Model Parameters ◽  
Specific Time ◽  
Goodness Of Fit Test ◽  
Proposed Model ◽  
Subject Specific ◽  
The Subject ◽  
The Mean ◽  
Over Time

Biomedical studies often involve an event that occurs to individuals at different times and has a significant influence on individual trajectories of response variables over time. We propose a statistical model to capture the mean trajectory alteration caused by not only the occurrence of the event but also the subject-specific time of the event. The proposed model provides a post-event mean trajectory smoothly connected with the pre-event mean trajectory by allowing the model parameters associated with the post-event mean trajectory to vary over time of the event. A goodness-of-fit test is considered to investigate how well the proposed model is fit to the data. Hypothesis tests are also developed to assess the influence of the subject-specific time of event on the mean trajectory. Theoretical and simulation studies confirm that the proposed tests choose the correctly specified model consistently and examine the effect of the subject-specific time of event successfully. The proposed model and tests are also illustrated by the analysis of two real-life data from a biomarker study for HIV patients along with their own time of treatment initiation and a body fatness study in girls with different age of menarche.

Going from Regulation to Supervision: Support for Paradigm Shift from an Efficiency Study of the Merchant Banking Industry In Singapore

2002 ◽  
Vol 05 (01) ◽  
pp. 31-51 ◽  
Author(s):  
Guan Hua Lim
Keyword(s):  
Financial Institutions ◽  
Paradigm Shift ◽  
Banking Industry ◽  
Financial Institution ◽  
Reliable Indicator ◽  
New Paradigm ◽  
Financial Strength ◽  
Cost Efficiencies ◽  
Over Time

Increasingly we are witnessing a paradigm shift from checklist style regulations of financial institutions to one that emphasizes supervision and the role of the marketplace. Advocates of this new paradigm argue that the size and financial strength of a financial institution does not necessarily equate to excellence and efficiency. This paper offers as evidence from an efficiency study of the merchant banking industry in Singapore that such a paradigm shift is appropriate. The findings of the study indicate that the efficiencies of the merchant banks do not appear to change much over time, profit and cost efficiencies are un-correlated, and that size is not a reliable indicator of efficiency.

scholarly journals Deep Learning-Based Method for Computing Initial Margin

2021 ◽  
Vol 7 (1) ◽  
pp. 41
Author(s):  
Joel Pérez Villarino ◽  
Álvaro Leitao Rodríguez
Keyword(s):  
Neural Networks ◽  
Artificial Neural Networks ◽  
Deep Learning ◽  
Interest Rate ◽  
Financial Institutions ◽  
Optimal Configuration ◽  
Model Parameters ◽  
Basel Iii ◽  
Interest Rate Swap ◽  
Rate Swap

Following the guidelines of the Basel III agreement (2013), large financial institutions are forced to incorporate additional collateral, known as Initial Margin, in their transactions in OTC markets. Currently, the computation of such collateral is performed following the Standard Initial Margin Model (SIMM) methodology. Focusing on a portfolio consisting of an interest rate swap, we propose the use of Artificial Neural Networks (ANN) to approximate the Initial Margin value of the portfolio over its lifetime. The goal is to find an optimal configuration of structural hyperparameters, as well as to analyze the robustness of the network to variations in the model parameters and swap features.

On the Individual

1999 ◽  
Vol 4 (4) ◽  
pp. 205-218 ◽  
Author(s):  
David Magnusson
Keyword(s):  
School Psychologist ◽  
Real Life ◽  
Psychological Research ◽  
Developmental Research ◽  
Future Directions ◽  
The 1950S ◽  
The Individual ◽  
Over Time

A description of two cases from my time as a school psychologist in the middle of the 1950s forms the background to the following question: Has anything important happened since then in psychological research to help us to a better understanding of how and why individuals think, feel, act, and react as they do in real life and how they develop over time? The studies serve as a background for some general propositions about the nature of the phenomena that concerns us in developmental research, for a summary description of the developments in psychological research over the last 40 years as I see them, and for some suggestions about future directions.

Weekly Exercise Consistently Reinstates Positive Mood

1998 ◽  
Vol 3 (4) ◽  
pp. 271-280 ◽  
Author(s):  
Hannah Steinberg ◽  
Briony R. Nicholls ◽  
Elizabeth A. Sykes ◽  
N. LeBoutillier ◽  
Nerina Ramlakhan ◽  
...  
Keyword(s):  
Physical Exercise ◽  
Negative Mood ◽  
Real Life ◽  
Positive Mood ◽  
Field Investigation ◽  
Single Bout ◽  
Before And After ◽  
Exercise Class ◽  
Negative Feelings ◽  
Over Time

Mood improvement immediately after a single bout of exercise is well documented, but less is known about successive and longer term effects. In a “real-life” field investigation, four kinds of exercise class (Beginners, Advanced, Body Funk and Callanetics) met once a week for up to 7 weeks. Before and after each class the members assessed how they felt by completing a questionnaire listing equal numbers of “positive” and “negative” mood words. Subjects who had attended at least five times were included in the analysis, which led to groups consisting of 18, 20, 16, and 16 subjects, respectively. All four kinds of exercise significantly increased positive and decreased negative feelings, and this result was surprisingly consistent in successive weeks. However, exercise seemed to have a much greater effect on positive than on negative moods. The favorable moods induced by each class seemed to have worn off by the following week, to be reinstated by the class itself. In the Callanetics class, positive mood also improved significantly over time. The Callanetics class involved “slower,” more demanding exercises, not always done to music. The Callanetics and Advanced classes also showed significantly greater preexercise negative moods in the first three sessions. However, these differences disappeared following exercise. Possibly, these two groups had become more “tolerant” to the mood-enhancing effects of physical exercise; this may be in part have been due to “exercise addiction.”

Effects of Financial Innovations on Profitability for Deposit Taking Microfinancing Institutions in Kenya

2018 ◽  
Vol 9 (6) ◽  
pp. 529-536
Author(s):  
Martin Khoya Odipo ◽  
Keyword(s):  
Financial Institutions ◽  
Positive Relationship ◽  
Financial Institution ◽  
Secondary Data ◽  
Financial Statements ◽  
Descriptive Statistics ◽  
Primary Data ◽  
Microfinance Institutions ◽  
Financial Innovations ◽  
Strong Positive Relationship

Recent studies have documented that innovations improve profitability of firms. This article documents that deposit taking micro financial institutions that have adopted financial innovations have increased their profitability. The study covered five years between 2009-2013. Both primary and secondary data were used in the study. Primary data was obtained through administration of drop and pick questionnaires to selected employees of the institutions. Secondary data was obtained from financial statements and management reports of these deposit taking microfinance institutions. Data was analyzed using descriptive statistics, return on asset and multi-liner regression model to determine the effect of each financial innovation applied on profitability on the micro-financial institution. The results showed that most deposit taking microfinance institutions adopted these financial innovations in their current operations. There was strong positive relationship between individual innovations and profitability. In line with profitability ROA also showed improvement each year after the adoption of these financial innovations.

STORYTELLING AND MEANING RECONSTRUCTION: A METAPHORICAL PERSPECTIVE

2016 ◽  
Vol 24 (2) ◽  
pp. 159-169
Author(s):  
M L Mojapelo
Keyword(s):  
Personal Development ◽  
Real Life ◽  
Human Existence ◽  
Meaning Reconstruction ◽  
Changing Patterns ◽  
The Subject ◽  
Changes Over Time ◽  
Over Time

Storytelling consists of an interaction between a narrator and a listener, both of whom assign meaning to the story as a whole and its component parts. The meaning assigned to the narrative changes over time under the influence of the recipient‟s changing precepts and perceptions which seem to be simplistic in infancy and more nuanced with age. It becomes more philosophical in that themes touching on the more profound questions of human existence tend to become more prominently discernible as the subject moves into the more reflective or summative phases of his or her existence. The aim of this article is to demonstrate the metaphorical character of a story, as reflected in changing patterns of meaning assigned to the narrative in the course of the subjective receiver‟s passage through the various stages of life. This was done by analysing meaning, from a particular storytelling session, at different stages of a listener‟s personal development. Meaning starts as literal and evolves through re-interpretation to abstract and deeper levels towards application in real life.

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