scholarly journals New copulas based on general partitions-of-unity and their applications to risk management

2016 ◽  
Vol 4 (1) ◽  
Author(s):  
Dietmar Pfeifer ◽  
Hervé Awoumlac Tsatedem ◽  
Andreas Mändle ◽  
Côme Girschig
Keyword(s):  
Risk Management ◽  
Tail Dependence ◽  
Partition Of Unity ◽  
Real Data ◽  
Finite Partition

AbstractWe construct new multivariate copulas on the basis of a generalized infinite partition-of-unity approach. This approach allows, in contrast to finite partition-of-unity copulas, for tail-dependence as well as for asymmetry. A possibility of fitting such copulas to real data from quantitative risk management is also pointed out.

scholarly journals New copulas based on general partitions-of-unity (part III) — the continuous case

2019 ◽  
Vol 7 (1) ◽  
pp. 181-201 ◽  
Author(s):  
Dietmar Pfeifer ◽  
Andreas Mändle ◽  
Olena Ragulina ◽  
Côme Girschig
Keyword(s):  
Risk Management ◽  
Natural Extension ◽  
Simple Algorithm ◽  
Tail Dependence ◽  
Partition Of Unity ◽  
Solvency Ii ◽  
Continuous Case ◽  
High Dimensional ◽  
Data Sets ◽  
Empirical Copula

AbstractIn this paper we discuss a natural extension of infinite discrete partition-of-unity copulas which were recently introduced in the literature to continuous partition of copulas with possible applications in risk management and other fields. We present a general simple algorithm to generate such copulas on the basis of the empirical copula from high-dimensional data sets. In particular, our constructions also allow for an implementation of positive tail dependence which sometimes is a desirable property of copula modelling, in particular for internal models under Solvency II.

scholarly journals New copulas based on general partitions-of-unity and their applications to risk management (part II)

2017 ◽  
Vol 5 (1) ◽  
pp. 246-255 ◽  
Author(s):  
Dietmar Pfeifer ◽  
Andreas Mändle ◽  
Olena Ragulina
Keyword(s):  
Risk Management ◽  
Negative Binomial ◽  
Partition Of Unity ◽  
Data Driven ◽  
Asymmetric Data ◽  
Arbitrary Dimensions

Abstract We present a constructive and self-contained approach to data driven infinite partition-of-unity copulas that were recently introduced in the literature. In particular, we consider negative binomial and Poisson copulas and present a solution to the problem of fitting such copulas to highly asymmetric data in arbitrary dimensions.

scholarly journals A Supply Chain Vulnerability Map for the Automotive and Electronic Industries in Brazil

2020 ◽  
Vol 3 (2) ◽  
pp. 83 ◽  
Author(s):  
Mauricio F. Blos ◽  
Hui-Ming Wee
Keyword(s):  
Risk Management ◽  
Supply Chain ◽  
Historical Data ◽  
Methodological Approach ◽  
Real Data ◽  
Economic Downturn ◽  
Supply Chain Risk Management ◽  
Supply Chain Risk ◽  
Vulnerability Map ◽  
Hazard Vulnerability

This paper aims to explore various perspectives of the Supply Chain Risk Management (SCRM) as they relate to the automotive and electronic industries in Brazil based on the historical data from 2010 to 2016. The methodological approach was based on the Supply Chain Vulnerability Map (SCVM). The SCVM was tested in its totaliness and two more riskswere added to the hazard vulnerability category to form the SCVM II. The exploratory surveys were used to better understand the impacts on the automotive and electronic industries in Brazil during the study period. An interesting finding was that most of the major automotive and electronic industries are concerned with integrating risk management, governance and compliance in the supply chain. The findings of the empiricalinvestigation and SCRM historical data indicate that managers must integrate risk management, governance and compliance in the supply chain and use the proposed SCVM II. This research revealed the risks that surrounded the supply chain during the time period covered. In the study, the researchers added two more risks to the hazard vulnerability category: item 10, deficient rainfall (as seen in Manaus and São Paulo) and number 13, viral epidemics (to reflect the Zika virus around Brazil), it was named as SCVMII. Among the limitations of the research was that the study applied real data which might vary drastically due to economic downturn of the country. This might affect the performance of the investigated industries.

A Mixture Price Trend Model for Long-Term Risk Management

2010 ◽  
pp. 157-173
Author(s):  
Eric S. Fung ◽  
Wai-Ki Ching ◽  
Tak-Kuen Siu
Keyword(s):  
Risk Management ◽  
Financial Risk ◽  
Estimation Method ◽  
Real Data ◽  
Price Trend ◽  
Trend Model ◽  
Proposed Model ◽  
Price Trends ◽  
Long Term Forecasting

In financial forecasting, a long-standing challenging issue is to develop an appropriate model for forecasting long-term risk management of enterprises. In this chapter, using financial markets as an example, we introduce a mixture price trend model for long-term forecasts of financial asset prices with a view to applying it for long-term financial risk management. The key idea of the mixture price trend model is to provide a general and flexible way to incorporate various price trend behaviors and to extract information from price trends for long-term forecasting. Indeed, the mixture price trend model can incorporate model uncertainty in the price trend model, which is a key element for risk management and is overlooked in some of the current literatures. The mixture price trend model also allows the incorporation of users’ subjective views on long-term price trends. An efficient estimation method is introduced. Statistical analysis of the proposed model based on real data will be conducted to illustrate the performance of the model.

scholarly journals Multi-Horizon Dependence between Crude Oil and East Asian Stock Markets and Implications in Risk Management

Energies ◽  
2020 ◽  
Vol 13 (2) ◽  
pp. 294 ◽  
Author(s):  
Xiaojing Cai ◽  
Shigeyuki Hamori ◽  
Lu Yang ◽  
Shuairu Tian
Keyword(s):  
Risk Management ◽  
Crude Oil ◽  
Stock Markets ◽  
East Asian ◽  
Tail Dependence ◽  
Dependence Structure ◽  
Time Varying ◽  
Risk Hedging ◽  
Long Run ◽  
East Asian Stock Markets

This paper examines the dynamic dependence structure of crude oil and East Asian stock markets at multiple frequencies using wavelet and copulas. We also investigate risk management implications and diversification benefits of oil-stock portfolios by calculating and comparing risk and tail risk hedging performance. Our results provide strong evidence of time-varying dependence and asymmetric tail dependence between crude oil and East Asian stock markets at different frequencies. The level and fluctuation of their dependencies increase as time scale increases. Furthermore, we find the time-varying hedging benefits differ at investment horizons and reduced over the long run. Our results suggest that crude oil could be used as a hedge and safe haven against East Asian stock markets, especially in the short- and mid-term.

Robust feature screening for multi-response trans-elliptical regression model with ultrahigh-dimensional covariates

2019 ◽  
Vol 09 (04) ◽  
pp. 2150001
Author(s):  
Yong He ◽  
Hao Sun ◽  
Jiadong Ji ◽  
Xinsheng Zhang
Keyword(s):  
Regression Model ◽  
Canonical Correlation ◽  
Main Idea ◽  
Tail Dependence ◽  
Real Data ◽  
Feature Screening ◽  
Canonical Correlations ◽  
Heavy Tailed Distributions ◽  
Sure Screening ◽  
Heavy Tailed

In this paper, we innovatively propose an extremely flexible semi-parametric regression model called Multi-response Trans-Elliptical Regression (MTER) Model, which can capture the heavy-tail characteristic and tail dependence of both responses and covariates. We investigate the feature screening procedure for the MTER model, in which Kendall’ tau-based canonical correlation estimators are proposed to characterize the correlation between each transformed predictor and the multivariate transformed responses. The main idea is to substitute the classical canonical correlation ranking index in [X. B. Kong, Z. Liu, Y. Yao and W. Zhou, Sure screening by ranking the canonical correlations, TEST 26 (2017) 1–25] by a carefully constructed non-parametric version. The sure screening property and ranking consistency property are established for the proposed procedure. Simulation results show that the proposed method is much more powerful to distinguish the informative features from the unimportant ones than some state-of-the-art competitors, especially for heavy-tailed distributions and high-dimensional response. At last, a real data example is given to illustrate the effectiveness of the proposed procedure.

scholarly journals Risk Pricing in Emerging Economies

2016 ◽  
Vol 5 (1) ◽  
pp. 51-72
Author(s):  
Yiannis Anagnostopoulos ◽  
Milad Abedi
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Management Practices ◽  
Credit Scoring ◽  
Real Data ◽  
Probit Regression ◽  
Credit Risk Management ◽  
Risk Pricing ◽  
Score Model ◽  
Correct Estimation

Iran’s banking industry as a developing country is comparatively very new to risk management practices. An inevitable predictive implication of this rapid growth is the growing concerns with regard to credit risk management which is the motivation of conducting this research. The paper focuses on the credit scoring aspect of credit risk management using both logit and probit regression approaches. Real data on corporate customers are available for conducting this research which is also a contribution to this area for all other developing countries. Our questions focus on how future customers can be classified in terms of credibility, which models and methods are more effective in better capturing risks. Findings suggest that probit approaches are more effective in capturing the significance of variables and goodness-of-fitness tests. Seven variables of the Ohlson O-Score model are used: CL_CA, INTWO, OENEG, TA_TL, SIZE, WCAP_TA, and ROA; two were found to be statistically significant in logit (ROA, TL_TA) and three were statistically significant in probit (ROA, TL_TA, SIZE). Also, CL_CA, ROA, and WCAP_TA were the three variables with an unexpected correlation to the probability of default. The prediction power with the cut-off point is set equal to 26% and 56.91% for defaulted customers in both logit and probit models. However, logit achieved 54.85% correct estimation of defaulted assets, 0.37% more than what probit estimated.

An Examination of Tail Dependence in Bordeaux Futures Prices and Parker Ratings

2017 ◽  
Vol 12 (3) ◽  
pp. 252-266 ◽  
Author(s):  
Don Cyr ◽  
Lester Kwong ◽  
Ling Sun
Keyword(s):  
Monte Carlo Simulation ◽  
Risk Management ◽  
Monte Carlo ◽  
Tail Dependence ◽  
Copula Function ◽  
Bivariate Distribution ◽  
Nonlinear Relationship ◽  
Futures Prices ◽  
The Relationship ◽  
Jel Classifications

AbstractThis paper explores the nonlinearities of the bivariate distribution of Bordeaux en primeur, or wine futures, prices and Parker “barrel ratings” for the period of 2004 through 2010. In particular, copula-function methodology is introduced and employed to examine the nature of the bivariate distribution. Our results show a significant nonlinear relationship between Parker ratings and wine prices, characterized by significant positive tail dependence and higher correlation between high ratings and high prices. Marginal distributions for Parker ratings and wine prices are then identified and Monte Carlo simulation is employed to operationalize the relationship for risk-management purposes. (JEL Classifications: C19, G13, L66)

scholarly journals PATHS AND INDICES OF MAXIMAL TAIL DEPENDENCE

2015 ◽  
Vol 45 (3) ◽  
pp. 661-678 ◽  
Author(s):  
Edward Furman ◽  
Jianxi Su ◽  
Ričardas Zitikis
Keyword(s):  
Risk Management ◽  
Tail Dependence ◽  
New Paradigm ◽  
Dependent Risks ◽  
Basic Concepts ◽  
Do So

AbstractWe demonstrate both analytically and numerically that the existing methods for measuring tail dependence in copulas may sometimes underestimate the extent of extreme co-movements of dependent risks and, therefore, may not always comply with the new paradigm of prudent risk management. This phenomenon holds in the context of both symmetric and asymmetric copulas with and without singularities. As a remedy, we introduce a notion of paths of maximal (tail) dependence and utilize the notion to propose several new indices of tail dependence. The suggested new indices are conservative, conform with the basic concepts of modern quantitative risk management, and are capable of differentiating between distinct risky positions in situations when the existing indices fail to do so.

BIVARIATE MARSHALL–OLKIN EXPONENTIAL SHOCK MODEL

2020 ◽  
pp. 1-21
Author(s):  
H.A. Mohtashami-Borzadaran ◽  
H. Jabbari ◽  
M. Amini
Keyword(s):  
Exponential Distribution ◽  
Tail Dependence ◽  
Real Data ◽  
Continuous Data ◽  
Stochastic Comparison ◽  
Shock Model ◽  
Proposed Model ◽  
Shock Models ◽  
Kendall Distribution ◽  
Lack Of Memory Property

Abstract The well-known Marshall–Olkin model is known for its extension of exponential distribution preserving lack of memory property. Based on shock models, a new generalization of the bivariate Marshall–Olkin exponential distribution is given. The proposed model allows wider range tail dependence which is appealing in modeling risky events. Moreover, a stochastic comparison according to this shock model and also some properties, such as association measures, tail dependence and Kendall distribution, are presented. The new shock model is analytically quite tractable, and it can be used quite effectively, to analyze discrete–continuous data. This has been shown on real data. Finally, we propose the multivariate extension of the Marshall–Olkin model that has some intersection with the well-known multivariate Archimax copulas.

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