Garcia Trillos, C;
Bénézet, C;
Bonnefoy, J;
Chassagneux, J-F;
Deng, S;
Lenôtre, L;
(2019)
A sparse grid approach to balance sheet risk measurement.
ESAIM : Proceedings and Surveys
, 65
pp. 236-265.
10.1051/proc/201965236.
Preview |
Text
proc196510.pdf - Published Version Download (598kB) | Preview |
Abstract
In this work, we present a numerical method based on a sparse grid approximation to compute the loss distribution of the balance sheet of a financial or an insurance company. We first describe, in a stylised way, the assets and liabilities dynamics that are used for the numerical estimation of the balance sheet distribution. For the pricing and hedging model, we chose a classical Black & Scholes model with a stochastic interest rate following a Hull & White model. The risk management model describing the evolution of the parameters of the pricing and hedging model is a Gaussian model. The new numerical method is compared with the traditional nested simulation approach. We review the convergence of both methods to estimate the risk indicators under consideration. Finally, we provide numerical results showing that the sparse grid approach is extremely competitive for models with moderate dimension.
| Type: | Article |
|---|---|
| Title: | A sparse grid approach to balance sheet risk measurement |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1051/proc/201965236 |
| Publisher version: | http://doi.org/10.1051/proc/201965236 |
| Language: | English |
| Additional information: | Copyright © EDP Sciences, SMAI 2019. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Maths and Physical Sciences UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Maths and Physical Sciences > Dept of Mathematics |
| URI: | https://discovery-pp.ucl.ac.uk/id/eprint/10072068 |
Archive Staff Only
 |
View Item |
