One-Way Trading with Transaction Costs

In the one-way trading problem a trader initially has all his capital invested in shares. He wishes to sell all his shares on the stock market to maximize his final cash. Vovk [1] showed that there are certain trading strategies that will guarantee, under any possible scenario, some final amount of cash. He also characterized […]

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Stochastic Processes in the Nelson-Siegel Framework

The dynamic Nelson-Siegel model was developed by Diebold and Li [1] as a very practical way of forecasting the yield curve. However, it was questioned whether or not this method could be mathematically substantiated. Unfortunately, we found that this was not the case. If we take into consideration the important concept of ‘absence of arbitrage’, […]

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Dynamic Replicating Portfolio Models

Savings accounts represent a large part of the funding of a bank. The bank wants to use this money for investments, but this is associated with a risk. At any time, clients can freely deposit or withdraw money from the bank, and therefore, a savings account does not have a predetermined maturity. Assumptions regarding the […]

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Forecasting the Yield Curve

“Forecasting the Yield Curve: Art or Science?” was published on March 12, 2015 in the Dutch Magazine De Actuaris. The article describes the dangers of predicting the term structure of interest rates. Is it an art or a science? RiskCo came up with a simple procedure to answer this. The term structure of interest rates […]

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ProductXpress Model Quality

RiskCo uses ProductXpress for the design, implementation, testing and deployment of financial products for their clients. They also assist their clients in any issue they might have with their models, during any phase of the product lifecycle. These phases are usually composed by a proof of concept (the so-called Administrative Periodic Inspection); the actual development […]

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Optimal Individual Pension Scheme

Everyone wants to receive an optimal pension as long as the risks involved aren’t too high. The amount of risk someone is willing to take in what is known as a defined contribution (DC) scheme differs per person. That is why there are different risk profiles for personal pension schemes:  aggressive, neutral or defensive. After […]

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