Study on model risk management method in multi-period and multi-asset models

• Project/Area Number: 15K03544
• Research Category: Grant-in-Aid for Scientific Research (C)
• Allocation Type: Multi-year Fund
• Section: 一般
• Research Field: Money/ Finance
• Research Institution: Kyushu University
• Principal Investigator: Matsumoto Koichi 九州大学, 経済学研究院, 教授 (30380687)
• Project Period (FY): 2015-04-01 – 2020-03-31
• Project Status: Completed (Fiscal Year 2019)
• Budget Amount: ¥4,420,000 (Direct Cost: ¥3,400,000、Indirect Cost: ¥1,020,000); Fiscal Year 2019: ¥780,000 (Direct Cost: ¥600,000、Indirect Cost: ¥180,000); Fiscal Year 2018: ¥780,000 (Direct Cost: ¥600,000、Indirect Cost: ¥180,000); Fiscal Year 2017: ¥910,000 (Direct Cost: ¥700,000、Indirect Cost: ¥210,000); Fiscal Year 2016: ¥910,000 (Direct Cost: ¥700,000、Indirect Cost: ¥210,000); Fiscal Year 2015: ¥1,040,000 (Direct Cost: ¥800,000、Indirect Cost: ¥240,000)
• Keywords: モデルリスク / 数理ファイナンス / 金融工学 / リスク管理 / デリバティブ / リスク測度

Outline of Final Research Achievements

Financial institutions have various assets and Mathematical models represent the asset fluctuations and they are essential tools for risk management. However, there is no mathematical model that completely represents the real market. Therefore, financial institutions have a potential risk of the uncertain model. We call it the model risk. In this study, the risk management of derivatives is studied under the assumption that the model risk exists in a multi-period and multi-asset model. We study the minimization of the hedging error and give the robust hedging strategy. Furthermore, when the model is a multi-asset or multi-period model, the amount of calculation is much larger than that of a one-asset and one-period model. We consider the feasibility of the numerical calculation and show a risk management method with a good balance between theory and practicality.

Academic Significance and Societal Importance of the Research Achievements

数理モデルの急速な複雑化に伴い，金融機関の抱えるモデルリスクは急激に増大しており，近年の金融危機の要因の１つはモデルリスク顕在化と捉えることができる．規制監督当局はモデルリスク管理の重要性を認識し始めているが，モデルリスク管理の理論研究は発展段階であり，実務の要請に応じられる理論や金融技術は確立していない．多資産，多期間のデリバティブのモデルリスク管理方法の研究によって，金融市場の潜在的モデルリスクを明らかにすることができると考えられる．私はこれらの研究を通じて，世界経済の安定的成長に貢献することで，社会全体の発展に貢献したいと考えている．

Research Products

• [Int'l Joint Research] Imperial College London(英国)
• [Journal Article] Hedging Derivatives on Two Assets with Model Risk (2020)
  • Author(s): Koichi Matsumoto, Keita Shimizu
  • Journal Title: Asia-Pacific Financial Markets Volume: 27, 1 Issue: 1 Pages: 83-95
  • DOI: 10.1007/s10690-019-09283-3
  • NAID: 40021872271
  • Peer Reviewed
• [Journal Article] Hedging Derivatives on Two Assets with Model Risk (2019)
  • Author(s): Koichi Matsumoto, Keita Shimizu
  • Journal Title: Discussion Paper Series, Graduate School of Economics, Kyushu University Volume: 2019-1 Pages: 1-12
  • NAID: 40021872271
• [Journal Article] Partial super-hedging of derivatives with model risk (2017)
  • Author(s): Koichi Matsumoto
  • Journal Title: Japan Journal of Industrial and Applied Mathematics Volume: 34 Issue: 3 Pages: 811-831
  • DOI: 10.1007/s13160-017-0267-7
  • NAID: 210000171300
  • Peer Reviewed
• [Journal Article] Mean-variance hedging with model risk (2017)
  • Author(s): Koichi Matsumoto
  • Journal Title: International Journal of Financial Engineering Volume: 04 Issue: 04 Pages: 1750042-1750042
  • DOI: 10.1142/s2424786317500426
  • NAID: 40020654577
  • Peer Reviewed
• [Journal Article] Model Risk of two Assets Derivatives (2016)
  • Author(s): Koichi Matsumoto, Maki Ichikawa
  • Journal Title: Proceedings of the 47th ISCIE International Symposium on Stochastic Systems Theory and Its Applications Volume: 1 Pages: 144-153
  • NAID: 130005277607
  • Peer Reviewed / Acknowledgement Compliant
• [Journal Article] Mean-Variance Hedging with Model Risk (2015)
  • Author(s): Koichi Matsumoto
  • Journal Title: Discussion Paper Series, Graduate School of Economics, Kyushu University Volume: 2015-4 Pages: 1-20
  • NAID: 40020654577
  • Acknowledgement Compliant
• [Presentation] Hedging Derivatives with Recalibration and Model Risk in a Multi-period Framework (2020)
  • Author(s): Koichi Matsumoto (joint work with Mark Davis and Seiya Goto)
  • Organizer: Finance and Stochastics Seminar (Imperial College London)
• [Presentation] モデルリスクを考慮した二資産デリバティブのヘッジに関する研究 (2018)
  • Author(s): Koichi Matsumoto, Keita Shimizu
  • Organizer: 第48回日本金融・証券計量・工学学会（JAFEE）大会（2017年度冬季）
• [Presentation] Optimal Hedging Strategy in an Uncertain Model (2017)
  • Author(s): Koichi Matsumoto
  • Organizer: Winter Workshop on Operations Research (WWOR), Finance and Mathematics 2017
  • Place of Presentation: Sapporo, Hokkaido, Japan
  • Year and Date: 2017-02-21
  • Int'l Joint Research
• [Presentation] Mean-Variance Hedging of Two-Asset Derivatives with Model Risk (2017)
  • Author(s): Koichi Matsumoto, Keita Shimizu
  • Organizer: Quantitative Methods in Finance Conference (QMF) 2017
• [Presentation] Mean-Variance Hedging with Model Risk (2016)
  • Author(s): Koichi Matsumoto
  • Organizer: Quantitative Methods in Finance Conference (QMF) 2016
  • Place of Presentation: Sydney, Australia
  • Year and Date: 2016-12-14
  • Int'l Joint Research
• [Presentation] Model Risk of two Assets Derivatives (2015)
  • Author(s): Koichi Matsumoto, Maki Ichikawa
  • Organizer: The 47th ISCIE International Symposium on Stochastic Systems Theory and Its Applications (SSS’15)
  • Place of Presentation: Honolulu, United States
  • Year and Date: 2015-12-05
  • Int'l Joint Research