Haar wavelets-based approach for quantifying credit portfolio losses

This paper proposes a new methodology to compute Value at Risk (VaR) for quantifying losses in credit portfolios. We approximate the cumulative distribution of the loss function by a finite combination of Haar wavelet basis functions and calculate the coefficients of the approximation by inverting its Laplace transform. The Wavelet Approximation (WA) method is specially suitable for non-smooth distributions, often arising in small or concentrated portfolios, when the hypothesis of the Basel II formulas are violated. To test the methodology we consider the Vasicek one-factor portfolio credit loss model as our model framework. WA is an accurate, robust and fast method, allowing to estimate VaR much more quickly than with a Monte Carlo (MC) method at the same level of accuracy and reliability.

Medidas de Perda na Avalia ção do Desempenho de Fundos de Investimentos

Uma das medidas de performance mais utilizada e a medida de Sharpe. A sua utiliza c~ao e inadequada quando as rendibilidades n~ao seguem uma distribui c~ao normal, assim originou o aparecimento de uma variedade de medidas alternativas. Em fun c~ao disso, surge ent~ao a quest~ao de saber se essas medidas alternativas produzem rankings signi cativamente diferentes da que se obt em com a medida de Sharpe. Apesar da exist^encia de muitos estudos emp ricos sobre esta problem atica a resposta n~ao e consensual. Neste trabalho fez-se a compara c~ao entre o ranking produzido pela medida de Sharpe e as algumas medidas alternativas, as que se baseiam no Low Partial Moments (Omega, Sortino, Kappa3 e Upside Potential Ratio) e, as que se baseiam no VaR - Value-at-Risk (ERV - Excess Return on VaR, ERMV - Excess Return on Modi ed VaR, ERCV - Excess Return on Conditional VaR e ERV? - Excess Return com VaR hist orico). Utilizando 26 fundos de investimentos norte-americanos, com registo di ario das rendibilidades para o per odo de Janeiro 2000 a Setembro 2009, encontrou-se um elevado coe ciente de correla c~ao de Spearman e de Kendall entre a medida de Sharpe e as alternativas, bem como as alternativas entre si, excepto para Upside Potential Ratio que os coe cientes s~ao relativamente baixos. Os resultados permitem concluir que existe uma medida que proporciona ordena c~oes diferentes.

Medidas de Perda na Avaliacão do Desempenho de Fundos de Investimentos

Uma das medidas de performance mais utilizada e a medida de Sharpe. A sua utilizacão e inadequada quando as rendibilidades não seguem uma distribuicão normal, assim originou o aparecimento de uma variedade de medidas alternativas. Em fun c~ao disso, surge então a questão de saber se essas medidas alternativas produzem rankings signi cativamente diferentes da que se obt em com a medida de Sharpe. Apesar da existencia de muitos estudos emp ricos sobre esta problem atica a resposta não e consensual. Neste trabalho fez-se a comparacão entre o ranking produzido pela medida de Sharpe e as algumas medidas alternativas, as que se baseiam no Low Partial Moments (Omega, Sortino, Kappa3 e Upside Potential Ratio) e, as que se baseiam no VaR - Value-at-Risk (ERV - Excess Return on VaR, ERMV - Excess Return on Modi ed VaR, ERCV - Excess Return on Conditional VaR e ERV? - Excess Return com VaR hist orico). Utilizando 26 fundos de investimentos norte-americanos, com registo di ario das rendibilidades para o per odo de Janeiro 2000 a Setembro 2009, encontrou-se um elevado coe ciente de correla c~ao de Spearman e de Kendall entre a medida de Sharpe e as alternativas, bem como as alternativas entre si, excepto para Upside Potential Ratio que os coe cientes s~ao relativamente baixos. Os resultados permitem concluir que existe uma medida que proporciona ordena c~oes diferentes.

A subsampling approach to estimating the distribution of diversing statistics with application to assessing financial market risks

In this paper we propose a subsampling estimator for the distribution ofstatistics diverging at either known rates when the underlying timeseries in strictly stationary abd strong mixing. Based on our results weprovide a detailed discussion how to estimate extreme order statisticswith dependent data and present two applications to assessing financialmarket risk. Our method performs well in estimating Value at Risk andprovides a superior alternative to Hill's estimator in operationalizingSafety First portofolio selection.

Transformation kernel density estimation of actuarial loss functions

[cat] Es presenta un estimador nucli transformat que és adequat per a distribucions de cua pesada. Utilitzant una transformació basada en la distribució de probabilitat Beta l’elecció del paràmetre de finestra és molt directa. Es presenta una aplicació a dades d’assegurances i es mostra com calcular el Valor en Risc.

Buy-and-Hold Strategies and Comonotonic Approximations

[cat] En aquest article estudiem estratègies “comprar i mantenir” per a problemes d’optimitzar la riquesa final en un context multi-període. Com que la riquesa final és una suma de variables aleatòries dependents, on cadascuna d’aquestes correspon a una quantitat de capital que s’ha invertit en un actiu particular en una data determinada, en primer lloc considerem aproximacions que redueixen l’aleatorietat multivariant al cas univariant. A continuació, aquestes aproximacions es fan servir per determinar les estratègies “comprar i mantenir” que optimitzen, per a un nivell de probabilitat donat, el VaR i el CLTE de la funció de distribució de la riquesa final. Aquest article complementa el treball de Dhaene et al. (2005), on es van considerar estratègies de reequilibri constant.

Transformation kernel density estimation of actuarial loss functions

[cat] Es presenta un estimador nucli transformat que és adequat per a distribucions de cua pesada. Utilitzant una transformació basada en la distribució de probabilitat Beta l’elecció del paràmetre de finestra és molt directa. Es presenta una aplicació a dades d’assegurances i es mostra com calcular el Valor en Risc.

Buy-and-Hold Strategies and Comonotonic Approximations

[cat] En aquest article estudiem estratègies “comprar i mantenir” per a problemes d’optimitzar la riquesa final en un context multi-període. Com que la riquesa final és una suma de variables aleatòries dependents, on cadascuna d’aquestes correspon a una quantitat de capital que s’ha invertit en un actiu particular en una data determinada, en primer lloc considerem aproximacions que redueixen l’aleatorietat multivariant al cas univariant. A continuació, aquestes aproximacions es fan servir per determinar les estratègies “comprar i mantenir” que optimitzen, per a un nivell de probabilitat donat, el VaR i el CLTE de la funció de distribució de la riquesa final. Aquest article complementa el treball de Dhaene et al. (2005), on es van considerar estratègies de reequilibri constant.

Preventing invasive candida infections. Where could we do better?

Invasive candidiasis is associated with high mortality rates, ranging from 35% to 60%, in the range reported for septic shock. The epidemiology and pathogenesis of invasive candidiasis differ according to the patient's immune status; the majority of cases in immunocompromised hosts are candidaemia, whereas non-candidaemic systemic candidiasis accounts for the majority of cases in critically ill patients. In contrast to candidaemia, non-candidaemic systemic candidiasis is difficult to prove, especially in critically ill patients. Up to 80% of these patients are colonized, but only 5-30% develop invasive infection. The differentiation of colonization and proven infection is challenging, and evolution from the former to the latter requires seven to 10 days. This continuum from colonization of mucosal surfaces to local invasion and then invasive infection makes it difficult to identify those critically ill patients likely to benefit most from antifungal prophylaxis or early empirical antifungal treatment. Early empirical treatment of non-candidaemic systemic candidiasis currently relies on the positive predictive value of risk assessment strategies, such as the colonization index, candida score, and predictive rules based on combinations of risk factors such as candida colonization, broad-spectrum antibiotics, and abdominal surgery. Although guidelines recently scored these strategies as being supported by limited evidence, they are widely used at bedside and have substantially decreased the incidence of invasive candidiasis.

Korkoriskin mittaaminen ja hallinta: Case Etelä-Karjalan Osuuspankki

Tutkielman päätavoitteena on eri menetelmillä selvittää Etelä-Karjalan Osuuspankin korkoriskin suuruus sekä luoda Etelä-Karjalan Osuuspankille suojausstrategia. Alatavoitteena on tarkastella, että miten pankki on tähän mennessä havainnut korkoriskin ja miten sitä vastaan on suojauduttu. Korkoriskiä tutkielmassa tullaan mittaamaan gap-, duraatio- sekä VaR-analyyseillä. Tutkielman alussa on perehdytty teoriapohjalta korkoriskin muodostumiseen, mittaamiseen sekä korkoriskiltä suojautumiseen. Teoriaosuuden havaintoja on hyödynnetty myöhemmin tutkielman empiirisessä osassa. Etelä-Karjalan Osuuspankin suurin ongelma korkoriskin näkökulmasta on se, että suuri osa tulevista korkotuotoista on vaihtuvakorkoisia, kun taas suuri osa tulevaisuuden korkokuluista on kiinteäkorkoisia. Suojausstrategia luodaan juuri tälle epäkohdalle.

The Role of Biomarkers for Starting Antifungals in the Intensive Care Unit

Invasive candidiasis is associated with high mortality rates (35% to 60%), similar to the range reported for septic shock. The most common types include candidemia, frequently observed in immunocompromised patients, and noncandidemic systemic candidiasis, which constitutes the majority of cases in critically ill patients. However, they are difficult to prove and a definite diagnosis usually occurs late in the course of the disease, thus contributing to their bad prognosis. Early empirical treatment improves the prognosis and currently relies on the positive predictive value (PPV) of risk-assessment strategies (colonization index, Candida score, predictive rules) based on combinations of risk factors, but it may have also largely contributed to the overuse of antifungal agents in critically ill patients. In this context, non- culture-based diagnostic methods, including specific and nonspecific biomarkers, may significantly improve the diagnosis of invasive candidiasis. Candida DNA and mannan antigen/antimannan antibodies are of limited interest for the diagnosis of invasive candidiasis as they fail to identify noncandidemic systemic candidiasis, despite early positivity in candidemic patients. The utility of 1,3-beta-D-glucan (b-D-glucan), a panfungal cell wall antigen, has been demonstrated for the diagnosis of fungal infections in immunocompromised patients. Preliminary data suggest that it is also detectable early in critically ill patients developing noncandidemic systemic candidiasis. To take advantage of the high negative predictive value of risk-assessment strategies and the early increase in specific fungal biomarkers in high-risk patients, we propose a practical 2-step approach to improve the selection of patients susceptible to benefit from empirical antifungal treatment.

Sijoitus- ja hedgerahastojen riski- ja menestysmittareiden vertaileva analyysi

Tutkimuksen tavoitteena on selvittää eroavatko erilaiset suorituskyvyn mittarit toisistaan ja antavatko ne toisista poikkeavia järjestyslukuja. Tutkimuksessa on käytetty seuraavia suorituskyvyn mittareita: Sharpen indeksi, mukautettu Sharpen indeksi, Safety first, Calmarin indeksi, Value at Risk, UPR, RMAD, RTSD, RTASD, Gini-pohjaiset, Z-pohjaiset sekä muutama modifioitu Sharpen indeksi. Tutkielman aineisto on saatu julkisista tietokannoista sekä osittain suljetuista tietokannoista. Aineisto koostuu sekä Amerikkalaisista hedge-rahastoista, että Suomalaisista osakerahastoista. Tuloksista on nähtävissä, että suorituskyvyn mittarit eivät paljonkaan poikkea toisistaan, kun selvitetään eroavatko tunnuslukujen antamat rahastojen parammuusjärjestykset toisistaan.

Management of commercial property derived risks in the market context of the Russian Federation

The objective of the thesis is to examine the current state of risk management and to determine an appropriate risk management policy for commercial property derived risks in the Russian branch of a Finnish retail trade company. The employed research methodologies are comparative in-depth interviews and empirical value at risk analysis, including portfolio risk decomposition to determine the inter-currency characteristics. For a multinational retail trade company, the commercial property derived risks open up as a diverse combination of financial and non-financial risks with four distinctive interest groups. The research results indicate that geographical diversification across currency regimes provides diversification benefits. The Russian ruble is the most significant single risk component when considering the net investments outside the euro-zone. Decreasing the Russian ruble and Swedish krona exposures are the most effective methods to reduce translation derived risk. Exchange rate volatility varies over time according to idiosyncratic currency regime characteristics, and cost-effective risk management requires comprehensive analysis of the business environment. Profound and proactive risk management methods are found to be pivotal for companies with cross-border operations in order to succeed among international competitors.

Diversification benefits for a Finnish non-industrial private forest investor: Real Estate Investment Trusts in the USA

This thesis examined both domestic and international forest investment options for a Finnish non-industrial private forest investor. The focus was on forest-based investment instruments. The influence of movements of currency exchange rates on foreign returns were also taken into account. Annual data from 1995 to 2011 was used. The main portfolio optimization model in this study was the Mean-Variance model but the results were also validated by using the Value at Risk and Expected Shortfall models. In addition, the exchange rate risk hedging was established by using one-week-maturity forward contracts. The results suggested that 75 % of the total wealth should be invested in Finnish private forests and the rest, 25 %, to a US REIT, in this case Rayonier. With hedging, the total return on the portfolio was 7.21 % (NIPF 5.3%) with the volatility of 6.63 % (NIPF 7.9%). Taxation supported US investments in this case. As a conclusion, a Finnish private forest investor may, as evidenced, benefit in diversifying a portfolio using REITs in the US.

Subprime-kriisi ja luottoriskin hallinta

Tutkielma käsittelee subprime-lainausta ja subprime-kriisiin johtaneita syitä. Lisäksi tutkielmassa käsitellään pankin luottoriskin hallintaa eri näkökulmista. Luottoriski on keskeisin luottolaitostoimintaan liittyvistä riskeistä ja siksi pankkien luottoriskin hallintaa tulee jatkuvasti parantaa. Luottotappiot ja niihin johtaneet syyt ovat keskeisesti tarkastelun alaisina, kun syitä subprime-kriisiin haetaan. Tutkielma perustuu kirjallisuuteen ja siinä pyritään tuomaan esiin eri tekijöitä, jotka vaikuttivat vuonna 2007 alkaneeseen subrime-kriisiin. Työ sisältää lyhyen pankkitoiminnan luonteen ja alan rakennemuutoksen, esittelen aluksi lyhyesti pankkitoiminnan perusperiaatteita ja yleistä toimintaa sekä kuvaan lyhyesti rahoitusmarkkinoiden kehitystä viime vuosikymmenten aikana. Seuraavana esittelen laajemmin luottoriskin roolia subprime-kriisissä sekä sen epäonnistunutta hallintaa osasyynä kriisiä. Tarkemmin käsittelen Value at Risk -mallia luottoriskin mittaamiskeinona ja credit scoring -luottopisteytysmenetelmän osana luottoriskin hallintaa. Toinen tutkimuksen pääaihe on subrime-lainaus. Subrime-kriisin syntyyn vaikuttaneena olennaisena tekijänä pidetään Yhdysvaltojen asuntomarkkinoita ja erityisesti subprime-asuntolainoja, jotka olivat luottoluokitukseltaan heikkoja. Näiden heikkojen lainojen yleistyessä koko rahoitusmarkkinoiden pohja heikkeni. Rahoitusjärjestelmän suurien ongelmien taustalla vaikuttivat osaltaan arvopaperistaminen ja sen avulla muodostetut sijoitusinstrumentit, yli-innokas lainaaminen markkinoilla tarjolla olleen runsaan likviditeetin seurauksena, huolimaton sijoittaminen, riskinottoa liian voimakkaasti painottavat kannustinjärjestelmät, laaja-alainen epäonnistuminen luottoriskinhallinnassa ja sääntelyssä. Näitä tekijöistä tutkielmassa tarkastellaan tarkemmin arvopaperistamista ja kasvanutta lainaamista subrime-kriisin syntymisen osatekijöinä.