Browsing by Subject "Risk management"

Now showing 1 - 14 of 14

Open Access
Augmenting bus factor analysis with visualization
(2024-01) Ahmed, Muhammad Umair
‘Bus factor’, also known as ‘truck factor’, is a measure of how vulnerable a software project is based on the minimum number of people who would have to leave the project (be ‘hit by a bus’) for it to stall. There is existing research on how to calculate bus factor for software projects but limited work on visualizing the bus factor. We believe providing visualization along with conventionally provided numerical bus factor results will help decision-makers manage the workload and knowledge distribution across the project and also help in planning and hiring decisions. This thesis proposes, implements, and evaluates a tool named BFViz to visualize bus factor and contributions for software projects from pre-processed Git history. It is a web application that provides a file-browser-like interface with an interactively navigable treemap. Additionally, it has filename-based filtering, individual contribution data for files and folders, and simulation of contributor departure. The tool is validated with a round of four user evaluations where users, ranging from project owners and engineering managers to developers, complete tasks using the tool on an open-source project that they are involved in and provide feedback with a semi-structured interview and a feature ranking activity. The overall task completion rate for the tasks was 79.55%. All case study participants preferred BFViz over text reports to understand bus factor data. The top three features, by mean ranking, were the contributors’ list, the files and folders’ visualization, and the simulation mode.
Open Access
Buyer's quantile hedge portfolios in discrete-time trading
(2013) Pinar, M.Ç.
The problem of quantile hedging for American claims is studied from the perspective of the buyer of a contingent claim by minimizing the 'expected failure ratio'. After a general study of the problem in infinite-state spaces, we pass to finite dimensions and examine the properties of the resulting finite-dimensional optimization problems. In finite-state probability spaces we obtain a bilinear programming formulation that admits an exact linearization using binary exercise variables. Numerical results with S&P 500 index options demonstrate the computational viability of the formulations. © 2013 Copyright Taylor and Francis Group, LLC.
Open Access
Dynamic financial planning: certainty equivalents, stochastic constraints and functional conjugate duality
(Taylor & Francis, 2005) Jefferson, T. R.; Scott, C. H.
This paper studies portfolios under risk and stochastic constraints. Certainty equivalents combine risk aversion and exponential utility to form the objective. Budget and stochastic constraints on the account balance are used to ensure a positive net worth over time. These portfolio models are analyzed by functional conjugate duality for general distributions and by conjugate duality for the normal distribution. All the programs are convex. The duals provide insight into this approach and relate it to other stochastic and financial concepts.
Open Access
Dynamic risk spillovers between gold, oil prices and conventional, sustainability and Islamic equity aggregates and sectors with portfolio implications
(Elsevier B.V., 2017) Mensi, W.; Hammoudeh, S.; Al-Jarrah, I. M. W.; Sensoy A.; Kang, S. H.
This paper investigates the time-varying equicorrelations and risk spillovers between crude oil, gold and the Dow Jones conventional, sustainability and Islamic stock index aggregates and 10 associated disaggregated Islamic sector stock indexes (basic materials, consumer services, consumer goods, energy, financials, health care, technology, industrials, telecommunications and utilities), using the multivariate DECO-FIAPARCH model and the spillover index of Diebold and Yilmaz (2012). We also conduct a risk management analysis at the sector level for commodity-Islamic stock sector index portfolios, using different risk exposure measures. For comparison purposes, we add the aggregate conventional Dow Jones global index and the Dow Jones sustainability world index. The results show evidence of time-varying risk spillovers between these markets. Moreover, there are increases in the correlations among the markets in the aftermath of the 2008–2009 GFC. Further, the oil, gold, energy, financial, technology and telecommunications sectors are net receivers of risk spillovers, while the sustainability and conventional aggregate DJIM indexes as well as the remaining Islamic stock sectors are net contributors of risk spillovers. Finally, we provide evidence that gold offers better portfolio diversification benefits and downside risk reductions than oil. © 2017 Elsevier B.V.
Open Access
Energy, precious metals, and GCC stock markets: Is there any risk spillover?
(Elsevier, 2019) Al-Yahyaee, K.; Mensi, W.; Şensoy, Ahmet; Kang, S.
We analyze dynamic return and risk spillovers between commodity futures (energy & precious metals) and the Gulf Cooperation Council (GCC) stock markets. Utilizing dynamic equicorrelation (DECO) models and the spillover index of Diebold and Yilmaz (2012), we show the existence of significant return and risk spillovers between the commodities and the GCC stock markets, particularly during the onset of the 2008–2009 global financial crisis. In addition, silver, platinum, and energy futures markets are net transmitter of returns to stock markets. Precious metals (except silver) and WTI oil are net transmitter of risk to GCC markets. Abdu Dhabi and Dubai are net transmitter of returns and risk to other markets. Moreover, portfolio management analysis shows that the mix of commodities and GCC equities provides diversification opportunities for different crisis periods. Finally, precious metal markets offer superior hedging effectiveness over energy markets for all GCC markets.
Open Access
Evaluating predictive performance of judgemental extrapolations from simulated currency series
(Elsevier, 1999) Pollock, A. C.; Macaulay, A.; Önkal-Atay, D.; Wilkie-Thomson, M. E.
Judgemental forecasting of exchange rates is critical for financial decision-making. Detailed investigations of the potential effects of time-series characteristics on judgemental currency forecasts demand the use of simulated series where the form of the signal and probability distribution of noise are known. The accuracy measures Mean Absolute Error (MAE) and Mean Squared Error (MSE) are frequently applied quantities in assessing judgemental predictive performance on actual exchange rate data. This paper illustrates that, in applying these measures to simulated series with Normally distributed noise, it may be desirable to use their expected values after standardising the noise variance. A method of calculating the expected values for the MAE and MSE is set out, and an application to financial experts' judgemental currency forecasts is presented.
Open Access
EVIM: a software package for extreme value analysis in MATLAB
(Walter de Gruyter GmbH, 2001) Gençay, R.; Selçuk, F.; Ulugülyagci, A.
From the practitioners' point of view, one of the most interesting questions that tail studies can answer is what are the extreme movements that can be expected in financial markets? Have we already seen the largest ones or are we going to experience even larger movements? Are there theoretical processes that can model the type of fat tails that come out of our empirical analysis? Answers to such questions are essential for sound risk management of financial exposures. It turns out that we can answer these questions within the framework of the extreme value theory. This paper provides a step-by-step guideline for extreme value analysis in the MATLAB environment with several examples.
Open Access
Exploring exchange rate returns at different time horizons
(Elsevier, 2002) Nekhili, R.; Altay-Salih, A.; Gençay, R.
The performance of the well-known stochastic processes used for the empirical distribution of the exchange rate returns at different time scales was discussed. The parameters of the candidate processes at different time scales were estimated and proceed with simulating the empirical distributions of exchange rate returns from selected candidate processes. Results showed that the empirical distribution of returns behaves differently at different frequencies.
Open Access
Futures hedging in electricity retailing
(Springer, 2022-09) Tanrısever, Fehmi; Büke, B.; Jongen, G.
This paper is concerned with the risk management practices of an electricity retailer motivated by the Dutch electricity market. We examine the effectiveness of the existing base- and peak-load futures contracts as a risk management tool for the electricity retailers. We analytically characterize the retailer’s optimal hedging policy as a function of the serial correlation of the prices and the demand profiles of its customers. We find that the retailer typically over-hedges in the futures market, and the over-hedging amount increases when both base- and peak-load contracts are used. Our findings indicate that although the existing contracts in the futures market are quite efficient to replicate the exposure from profiled customers, when industrial consumers and renewable generation are included to the retailer’s portfolio, the effectiveness of such contracts decreases substantially. In our motivating example, hedging the risk of the profiled customers with base-load contracts, the firm may reduce the variance of its cash flows by 85.9%. In addition to the base-load contracts, including peak-load contracts into the hedging portfolio of the retailer increases the efficiency of hedging to 89.3%. However, when we consider the aggregate portfolio of the retailer including profiled customers, industrial consumers and renewable contracts, the efficiency of hedging through the existing futures contracts goes down as low as 32.8% during certain periods. © 2022, The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature.
Open Access
Hybrid Petri-nets for modeling and performance evaluation of supply chains
(Taylor & Francis, 2011) Khilwani, N.; Tiwari, M.; Sabuncuoglu, I.
Modelling and analysis of complex and co-ordinated supply chains is a crucial task due to its inherent complexity and uncertainty. Therefore, the current research direction is to devise an efficient modelling technique that maps the dynamics of a real life supply chain and assists industrial practitioners in evaluating and comparing their network with other competing networks. Here an effective modelling technique, the hybrid Petri-net, is proposed to efficiently handle the dynamic behaviour of the supply chain. This modelling methodology embeds two enticing features, i.e. cost and batch sizes, in deterministic and stochastic Petri-net for the modelling and performance evaluation of supply chain networks. The model is subsequently used for risk management to investigate the issues of supply chain vulnerability and risk that has become a major research subject in recent years. In the test bed, a simple productive supply chain and an industrial supply chain are modelled with fundamental inventory replenishment policy. Subsequently, its performance is evaluated along with the identification and assessment of risk factors using analytical and simulation techniques respectively. Thus, this paper presents a complete package for industrial practitioners to model, evaluate performance and manage risky events in a supply chain.
Open Access
Is there a flight to quality due to inflation uncertainty?
(Elsevier BV, 2005) Guler, B.; Ozlale, U.
After two types of inflation uncertainty are derived within a time-varying parameter model with GARCH specification, the relationship between inflation uncertainty and interest rates for safe assets is investigated. The results support the existence of a "flight to quality" effect. © 2004 Elsevier B.V. All rights reserved.
Open Access
Order of limits in reputations
(Springer, 2016) Dalkıran, N. A.
The fact that small departures from complete information might have large effects on the set of equilibrium payoffs draws interest in the adverse selection approach to study reputations in repeated games. It is well known that these large effects on the set of equilibrium payoffs rely on long-run players being arbitrarily patient. We study reputation games where a long-run player plays a fixed stage-game against an infinite sequence of short-run players under imperfect public monitoring. We show that in such games, introducing arbitrarily small incomplete information does not open the possibility of new equilibrium payoffs far from the complete information equilibrium payoff set. This holds true no matter how patient the long-run player is, as long as her discount factor is fixed. This result highlights the fact that the aforementioned large effects arise due to an order of limits argument, as anticipated. Â© 2016, Springer Science+Business Media New York.
Open Access
Overnight borrowing, interest rates and extreme value theory
(Elsevier BV, 2006) Gençay, R.; Selçuk, F.
We examine the dynamics of extreme values of overnight borrowing rates in an inter-bank money market before a financial crisis during which overnight borrowing rates rocketed up to (simple annual) 4000 percent. It is shown that the generalized Pareto distribution fits well to the extreme values of the interest rate distribution. We also provide predictions of extreme overnight borrowing rates using pre-crisis data. The examination of tails (extreme values) provides answers to such issues as to what are the extreme movements to be expected in financial markets; is there a possibility for even larger movements and, are there theoretical processes that can model the type of fat-tails in the observed data? The answers to such questions are essential for proper management of financial exposures and laying ground for regulations. © 2005 Elsevier B.V. All rights reserved.
Open Access
Scaling properties of foreign exchange volatility
(Elsevier BV, 2001) Gençay, R.; Selçuk, F.; Whitcher, B.
In this paper, we investigate the scaling properties of foreign exchange volatility. Our methodology is based on a wavelet multi-scaling approach which decomposes the variance of a time series and the covariance between two time series on a scale by scale basis through the application of a discrete wavelet transformation. It is shown that foreign exchange rate volatilities follow different scaling laws at different horizons. Particularly, there is a smaller degree of persistence in intra-day volatility as compared to volatility at one day and higher scales. Therefore, a common practice in the risk management industry to convert risk measures calculated at shorter horizons into longer horizons through a global scaling parameter may not be appropriate. This paper also demonstrates that correlation between the foreign exchange volatilities is the lowest at the intra-day scales but exhibits a gradual increase up to a daily scale. The correlation coefficient stabilizes at scales one day and higher. Therefore, the benefit of currency diversification is the greatest at the intra-day scales and diminishes gradually at higher scales (lower frequencies). The wavelet cross-correlation analysis also indicates that the association between two volatilities is stronger at lower frequencies.