White Papers

White Paper 15, Tensor Representations of ActivityPub Networks

White Paper 15, Tensor Representations of ActivityPub Networks

Reading Time: 1 min.
Open Risk White Paper 15: Tensor Representations of ActivityPub Networks In this third Open Risk White Paper on Connecting the Dots we explore representations of online communication networks that are organized according to the ActivityPub protocol. We discuss the main relevant features of the protocol and the broader application ecosystem around it that shapes emerging online network topologies. We develop a stylized description of ActivityPub compliant networks as a mathematical multilayer network.
Connecting the Dots, Tensor Representations of Activitypub Networks

Connecting the Dots, Tensor Representations of Activitypub Networks

Reading Time: 4 min.
What are ActivityPub Networks? ActivityPub is a technical specification towards decentralized (more precisely, federated) social networking (termed the Fediverse) based upon the exchange of ActivityStreams messages that follow the Activity Vocabulary. The ActivityPub proposal has been standardized and published by the W3C and has motivated the design of several federated social networking systems. There are presently several concrete ActivityPub compliant implementations and the protocol sees meaningful adoption, primarily in the domain of federated social networks.
White Paper 14, Integrated Energy Accounting using Relational Databases

White Paper 14, Integrated Energy Accounting using Relational Databases

Reading Time: 3 min.
Open Risk White Paper 14: Integrated energy accounting using relational databases In this Open Risk White Paper we demonstrate a concrete implementation of an integrated energy accounting framework using relational database technologies. The framework enables accounting of non-financial disclosures (such as the physical and embodied energy footprints of economic transactions) while enforcing the familiar double-entry balance constraints used to produce conventional (monetary) accounts and financial statements. In addition, it allows enforcing constraints associated with the flow and transformations of energy that can happen inside the organizational perimeter.
White Paper 13, Techniques for Federated Analysis

White Paper 13, Techniques for Federated Analysis

Reading Time: 1 min.
Open Risk White Paper 13: Federated Credit Systems, Part II: Techniques for Federated Data Analysis In this Open Risk White Paper, the second of series focusing on Federated Credit Systems, we explore techniques for federated credit data analysis. Building on the first paper where we outlined the overall architecture, essential actors and information flows underlying various business models of credit provision, in this step we focus on the enabling arrangements and techniques for building Federated Credit Data Systems and enabling Federated Analysis.
Open Risk White Paper: Deep Linking Financial and Energy Accounting

Open Risk White Paper: Deep Linking Financial and Energy Accounting

We develop a conceptual framework for integrated accounting that imposes on certain non-financial disclosures the same double-entry balance constraints that apply to conventional financial statements. We identify the key ingredients required for a rigorous multidimensional accounting framework in terms of concepts, postulates and design choices, and we illustrate these ideas with a worked-out example of linking financial and energy accounts.

Reading Time: 9 min.
Integrated Energy Accounting is keeping track and reporting on an entity’s detailed energy footprint (primary inputs, transformations and waste generation) not as an addendum to financial accounting and reporting but as a deeply-linked extension that is subject to the same level of rigor. The central design is the use of multidimensional double-entry bookkeeping which tracks additional quantitative information characterizing economic objects beyond their monetary values. This choice ensures the enforcement of both classic balance sheet constraints and the applicable energy conservation laws.
White Paper 12, Deep-Linking Financial and Energy Accounting

White Paper 12, Deep-Linking Financial and Energy Accounting

Reading Time: 1 min.
Open Risk White Paper 12: Deep-Linking Financial and Energy Accounting We develop a conceptual framework for integrated accounting that produces (where possible) non-financial disclosures subject to the same double-entry balance constraints as those used to produce conventional financial statements and automatically ensures any additional conservation laws are satisfied. We identify the key ingredients required for such a rigorous integrated accounting framework, in terms of concepts, postulates and design choices. Our focus and concrete use case is built around energy accounting, keeping track on an entity’s detailed energy footprint (primary inputs, transformations and waste generation) as an extension of its standard financial accounting and reporting.
Open Risk White Paper: Sustainable Portfolio Management - Attribution and Allocation of Greenhouse Gas Emissions

Open Risk White Paper: Sustainable Portfolio Management - Attribution and Allocation of Greenhouse Gas Emissions

We develop an analytic framework that synthesizes current approaches to sustainable portfolio management in the context of addressing climate change. We discuss the different required information layers, approaches to emissions accounting, attribution and forward-looking limit frameworks implementing carbon budget constraints.

Reading Time: 3 min.
The frontpage graphic is adapted from Steffen et al. “Planetary Boundaries: Guiding human development on a changing planet”. Science (2015). The Planetary Boundaries concept was proposed in 2009 by this group of Earth system and environmental scientists. The group suggested that finding a “safe operating space for humanity” is a precondition for sustainable development. The framework is based on scientific evidence that human actions since the Industrial Revolution have become the main driver of global environmental change.
White Paper 11, Sustainable Portfolio Management of GHG

White Paper 11, Sustainable Portfolio Management of GHG

Reading Time: 0 min.
Open Risk White Paper 11: Sustainable Portfolio Management: Attribution and Allocation of Greenhouse Gas Emissions We develop an analytic framework that synthesizes current approaches to sustainable portfolio management in the context of addressing climate change. We discuss the different required information layers, approaches to emissions accounting, attribution and forward-looking limit frameworks implementing carbon budget constraints. Download Download OpenRiskWP11_021221 Citation @ARTICLE{OpenRiskWhitePaper11, author = {P. Papadopoulos}, year = {2021}, note = {\href{https://www.
White Paper 10, Concentration, diversity in economic networks

White Paper 10, Concentration, diversity in economic networks

Reading Time: 1 min.
Open Risk White Paper 10: Connecting the Dots: Concentration, diversity, inequality and sparsity in economic networks In this second Open Risk White Paper on Connecting the Dots we examine measures of concentration, diversity, inequality and sparsity in the context of economic systems represented as network (graph) structures. We adopt a stylized description of economies as property graphs and illustrate how relevant concepts can be represented in this language. We explore in some detail data types representing economic network data and their statistical nature which is critical in their use in concentration analysis.
Connecting the Dots: Concentration, diversity, inequality and sparsity in economic networks

Connecting the Dots: Concentration, diversity, inequality and sparsity in economic networks

In this second Open Risk White Paper on "Connecting the Dots" we examine measures of concentration, diversity, inequality and sparsity in the context of economic systems represented as network (graph) structures.

Reading Time: 6 min.
Concentration, diversity, inequality and sparsity in the context of economic networks In this second Open Risk White Paper on Connecting the Dots we examine measures of concentration, diversity, inequality and sparsity in the context of economic systems represented as network (graph) structures. We adopt a stylized description of economies as property graphs and illustrate how relevant concepts can represent in this language. We explore in some detail data types representing economic network data and their statistical nature which is critical in their use in concentration analysis.
Federated Credit Systems, Part One: Unbundling the Credit Provision Business Model

Federated Credit Systems, Part One: Unbundling the Credit Provision Business Model

In this Open Risk White Paper, the first in a series of three, we introduce and explore the concept of federated credit systems as a potentially interesting domain for the application of federated analysis and federated learning.

Reading Time: 1 min.
Federated Credit Systems, Part I: Unbundling the Credit Provision Business Model As an architectural design and information technology approach, federation has received increased attention in domains such as the medical sector (under the name federated analysis), in official statistics (under the name trusted data) and in mass computing devices (smartphones), under the name federated learning. In this (the first of series of three) white paper, we introduce and explore the concept of federated credit systems.
White Paper 09, Federated Credit Systems, Unbundling Credit Provision

White Paper 09, Federated Credit Systems, Unbundling Credit Provision

Reading Time: 1 min.
Open Risk White Paper 9: Federated Credit Systems, Part I: Unbundling The Credit Provision Business Model In this (the first of series of three) white paper, we introduce and explore the concept of federated credit systems. We review the rapidly developing fields of Federated Analysis and Federated Learning as already actively studied in the domains of medicine and consumer computing devices. This forms the backdrop for understanding the potential and challenges of applying similar concepts in finance and more particular credit provision.
Connecting the Dots: Economic Networks as Property Graphs

Connecting the Dots: Economic Networks as Property Graphs

Reading Time: 0 min.
Connecting the Dots: Economic Networks as Property Graphs We develop a quantitative framework that approaches economic networks from the point of view of contractual relationships between agents (and the interdependencies those generate). The representation of agent properties, transactions and contracts is done in the context of a property graph. A typical use case for the proposed framework is the study of credit networks. You can find the white paper here: (OpenRiskWP08_131219)
White Paper 08, Economic Networks as Property Graphs

White Paper 08, Economic Networks as Property Graphs

Reading Time: 0 min.
Open Risk White Paper 8: Connecting the Dots, Economic Networks as Property Graphs We develop a quantitative framework that approaches economic networks from the point of view of contractual relationships between agents (and the interdependencies those generate). The representation of agent properties, transactions and contracts is done in the context of a property graph. A typical use case for the proposed framework is the study of credit networks. Download OpenRiskWP12_230922 PDF
Comparing IFRS 9 and CECL provision volatility

Comparing IFRS 9 and CECL provision volatility

Reading Time: 8 min.
Is the IFRS 9 or CECL standard more volatile? Its all relative Objective In this study we compare the volatility of reported profit-and-loss (PnL) for credit portfolios when those are measured (accounted for) following respectively the IFRS 9 and CECL accounting standards. The objective is to assess the impact of a key methodological difference between the two standards, the so-called Staging approach of IFRS 9. There are further explicit differences in the two standards.
Credit Portfolio PnL volatility under IFRS 9 and CECL

Credit Portfolio PnL volatility under IFRS 9 and CECL

Reading Time: 2 min.
Credit Portfolio PnL volatility under IFRS 9 and CECL Objective We explore conceptually a selection of key structural drivers of profit-and-loss (PnL) volatility for credit portfolios when profitability is measured following the principles underpinning the new IFRS 9 / CECL standards Methodology We setup stylized calculations for a credit portfolio with the following main parameters and assumptions: A portfolio of 200 commercial loans of uniform size and credit quality Maturities extending from one to five annual periods A stylized transition matrix producing typical multiyear credit curves Correlation between assets typical for a single business sector and geography portfolio Focusing on PnL estimates one year forward, with PnL being impacted both by Realized Losses (defaults) and Provision variability (both positive and negative).
Credit Portfolio Management in the IFRS 9 / CECL and Stress Testing Era

Credit Portfolio Management in the IFRS 9 / CECL and Stress Testing Era

Reading Time: 3 min.
Credit Portfolio Management in the IFRS 9 / CECL and Stress Testing Era The post-crisis world presents portfolio managers with the significant challenge to asimilate in day-to-day management the variety of conceptual frameworks now simultaneously applicable in the assessment of portfolio credit risk: The first major strand is the widespread application of regulatory stress testing methodologies in the estimation of regulatory risk capital requirements The second major strand is the introduction of new accounting standards (IFRS 9 / CECL) for the measurement and disclosure of expected credit losses While both Regulatory Stress Testing and IFRS 9 / CECL accounting require investment in analytic capabilities and provide unique new insights, both are aimed at satisfying evolving prudential or investor disclosure requirements.
IFRS 9 Expected Credit Loss and Risk Capital

IFRS 9 Expected Credit Loss and Risk Capital

Reading Time: 5 min.
The new IFRS 9 financial reporting standard IFRS 9 (and the closely related CECL) is a brand new financial reporting standard developed and approved by the International Accounting Standards Board (IASB). Strictly speaking IFRS 9 concerns only the accounting and reporting of financial instruments (e.g. bank loans and similar credit products). Yet the introduction of the IFRS 9 standard has significant repercussions beyond financial reporting, and touches e.g., bank risk management as well.
A Risk Agnostic Approach to European Safe Bonds (ESBies) Tranching

A Risk Agnostic Approach to European Safe Bonds (ESBies) Tranching

Reading Time: 7 min.
What are European Safe Bonds? While the creation of the eurozone was a landmark of the European integration process, the financial crisis highlighted that the eurozone remains an incomplete design which can lead to unpredictable and adverse situations in the event of a (the) next major crisis. One of the key such incompleteness features of the current eurozone architecture is that it does not have a truly risk-free (safe) euro debt instrument: one that continues being serviced (avoids a default event) at virtually any point in time and state of the world, no matter how severe.
Risk Capital for Non-Performing Loans

Risk Capital for Non-Performing Loans

Reading Time: 2 min.
Risk Capital for Non-Performing Loans Currently many countries are drowning in bad credits This visualization from the World Bank shows the current distribution of non-performing loans (NPL’s in short) around the world, as fraction of the total outstanding loans: Translated in absolute numbers (according to IMF data) the European NPL book alone stands at around 1 trillion EUR. As the adage goes, a trillion here, a trillion there, you pretty soon talk about serious money