Mathematical and Computational Finance Seminar

Please note that the list below only shows forthcoming events, which may not include regular events that have not yet been entered for the forthcoming term. Please see the past events page for a list of all seminar series that the department has on offer.

Past events in this series
8 March 2018
16:00
Abstract


We consider calculation of VaR/TVaR capital requirements when the underlying economic scenarios are determined by simulatable risk factors. This problem involves computationally expensive nested simulation, since evaluating expected portfolio losses of an outer scenario (aka computing a conditional expectation) requires inner-level Monte Carlo. We introduce several inter-related machine learning techniques to speed up this computation, in particular by properly accounting for the simulation noise. Our main workhorse is an advanced Gaussian Process (GP) regression approach which uses nonparametric spatial modeling to efficiently learn the relationship between the stochastic factors defining scenarios and corresponding portfolio value. Leveraging this emulator, we develop sequential algorithms that adaptively allocate inner simulation budgets to target the quantile region. The GP framework also yields better uncertainty quantification for the resulting VaR/\TVaR estimators that reduces bias and variance compared to existing methods.  Time permitting, I will highlight further related applications of statistical emulation in risk management.
This is joint work with Jimmy Risk (Cal Poly Pomona). 
 

  • Mathematical and Computational Finance Seminar
Add to My Calendar