Intro FOSDEM is a non-commercial, volunteer-organized European event centered on free and open-source software development. It is aimed at developers and anyone interested in the free and open-source software movement. It aims to enable developers to meet and to promote the awareness and use of free and open-source software. FOSDEM is held annually since 2001, usually during the first weekend of February, at the Université Libre de Bruxelles Solbosch campus in the southeast of Brussels, Belgium.
Semantic Web Technologies The Risk Model Ontology is a framework that aims to represent and categorize knowledge about risk models using semantic web information technologies. In principle any semantic technology can be the starting point for a risk model ontology. The Open Risk Manual adopts the W3C’s Web Ontology Language (OWL). OWL is a Semantic Web language designed to represent rich and complex knowledge about things, groups of things, and relations between things.
The motivation for federated credit risk models Federated learning is a machine learning technique that is receiving increased attention in diverse data driven application domains that have data privacy concerns. The essence of the concept is to train algorithms across decentralized servers, each holding their own local data samples, hence without the need to exchange potentially sensitive information. The construction of a common model is achieved through the exchange of derived data (gradients, parameters, weights etc).
Overview of the Julia-Python-R Universe A new Open Risk Manual entry offers a side-by-side review of the main open source ecosystems supporting the Data Science domain: Julia, Python, R, sometimes abbreviated as Jupyter. Motivation A large component of Quantitative Risk Management relies on data processing and quantitative tools (aka Data Science). In recent years open source software targeting Data Science finds increased adoption in diverse applications. The Overview of the Julia-Python-R Universe article is a side by side comparison of a wide range of aspects of Python, Julia and R language ecosystems.
Open Source Securitisation Motivation After the Great Financial Crisis securitisation has become the poster child of a financial product exhibiting complexity and opaqueness. The issues and lessons learned post-crisis were many, involving all aspects of the securitisation process, from the nature and quality of the underlying assets, the incentives of the various agents involved and the ability of investors to analyze the products they invested in. While the most egregious complications involved various types of re-securitisation and/or the interplay of structured credit derivatives undoubtedly even “vanilla” securitisation structure has a considerable amount of business logic.
Motivation for the comparison A large component of risk management relies on data processing and quantitative tools. In turn, such information processing pipelines and numerical algorithms must be implemented in computer systems. Computing systems come in an extraordinary large variety but in recent years open source software finds increased adoption for diverse applications (machine learning, data science, artificial intelligence). In particular cloud computing environments are primarily based on open source projects at the systems level.
Release of version 0.4.1 of the transitionMatrix package focuses on stressing transition matrices Further building the open source OpenCPM toolkit this realease of transitionMatrix features: Feature: Added functionality for conditioning multi-period transition matrices Training: Example calculation and visualization of conditional matrices Datasets: State space description and CGS mappings for top-6 credit rating agencies Conditional Transition Probabilities The calculation of conditional transition probabilities given an empirical transition matrix is a highly non-trivial task involving many modelling assumptions.
Release of version 0.4 of the transitionMatrix package Further building the open source OpenCPM toolkit this realease of transitionMatrix features: Feature: Added Aalen-Johansen Duration Estimator Documentation: Major overhaul of documentation, now targeting ReadTheDocs distribution Training: Streamlining of all examples Installation: Pypi and wheel installation options Datasets: Synthetic Datasets in long format Enjoy!
Release of version 0.4 of the Concentration Library adds Geographic / Industrial concentration indexes Further building out the OpenCPM set of tools, we release version 0.4 of the Concentration Library, a python library for the computation of various concentration, diversification and inequality indices. The below list provides documentation URL’s for each one of the implemented classic indexes (the Hoover index is a new addition in this release Atkinson Index Hoover Index Concentration Ratio Berger-Parker Index Herfindahl-Hirschman Index Hannah-Kay Index Gini Index Theil Index Shannon Index Generalized Entropy Index Kolm Index An important new direction that appears first in this release is the introduction of indexes that measure geographical and industrial concentration.
Release of version 0.3 of the Concentration Library Further building out the OpenCPM set of tools, we release version 0.3 of the Concentration Library. This python library for the computation of various concentration, diversification and inequality indices. The below list provides documentation URL’s for each one of the implemented indexes Atkinson Index Concentration Ratio Berger-Parker Index Herfindahl-Hirschman Index Hannah-Kay Index Gini Index Theil Index Shannon Index Generalized Entropy Index Kolm Index The image illustrates a simple use of the library where the HHI and Gini indexes are computed and compared for a range of randomly generated portfolio exposures.
First Release: OpenCPM NPL Database Further building out the OpenCPM set of tools, we took the Eupean Banking Authority’s recommended Non-Performning Loan templates and created an #opensource production grade database for capturing NPL portfolio data sets. Motivation for Building an open source database based on EBA’s Standardized NPL Templates In a recent insightful piece “Overcoming non-performing loan market failures with transaction platforms”, Fell et al. dug deeply into the market failures that perpetuate the NPL problem.
Here are four individuals that can look straight into your eyes Torvalds developed the #linux operating system, the software engine now powering anything from the tiniest #raspberrypi to the scariest supercomputer. Humanity’s best guarantee that the digital era remains an equal playing field Mullenweg developed the #wordpress blogging platform. Gave voice and content ownership to millions of digital authors making him the closest to the Gutenberg of our era
Open Risk released version 0.1 of the Transition Matrix Library Motivation State transition phenomena where a system exhibits stochastic (random) migration between well defined discrete states (see picture below for an illustration) are very common in a variety of fields. Depending on the precise specification and modelling assumptions they may go under the name of multi-state models, Markov chain models or state-space models. In financial applications a prominent example of phenomena that can be modelled using state transitions are credit rating migrations of pools of borrowers.
Transparency, collaboration key to regaining trust in financial services In banking, confidence is the first order of business Maintaining the confidence of market participants, clients, shareholders, regulators and governments is uniquely important for the financial sector. Trust is, quite literally, the real currency. Yet it is a truism that confidence is hard to build up and rather easy to destroy. Why is this so? The short answer: The difficulty in rebuilding trust is linked to the lack of transparency.
Risk Management Internship In finance, it’s the best of times, it’s the worst of times It is a special moment to start a career in financial services. We are walking amid the ruins of the previous financial order. Fallen banks, broken markets, negative interest rates, shell-shocked economies and discredited theoretical assumptions. We see the enormous cost and impact to the welfare of society of a less than perfect financial system which has not kept pace with the advancement of our general knowledge and technical capabilities in most other domains.
Open Risk is proud to be funded by the FIWARE FINODEX accelerator! Finodex, the European accelerator for ICT projects based on Open Data and FIWARE technologies, has already chosen over one hundred projects via two open calls for proposal. This week the results of the second call evaluation closed in last September have been published, and 52 projects from a total of 297 have been chosen by a panel of experts.
Risk modeling is as much art as it is science The Zen of Modeling aims to capture the struggle for risk modeling beauty An undocumented risk model is only a computer program A risk model that cannot be programmed is only a concept A risk model only comes to life with empirical validation Correct implementation of an imperfect model is better than wrong implementation of a perfect model In complex systems there is always more than one path to a risk model There are no persistently true models but there are many persistently wrong models Correlation is imperfectly correlated with causation Nirvana is the simplest model that is fit for purpose Hierarchical systems lead to hierarchical models.
Homo Staticus The web as we now know it burst first into the open in the early nineties. It certainly did not start among the “socially active” classes. It was an invention by and for nerdy CERN physicists, to exchange data about elementary particle experiments. The academics did finally figure out the true value of this technology: You could put your face online, along with a CV. This is how the personal webpage came to life.
Open Source Risk Modeling Manifesto This post is a summary of a presentation given at the 2014 Autumn TopQuants Meeting, aka, the “Open Source Risk Modeling Manifesto”. The dismal state of quantitative risk modeling The current framework of internal risk modeling at financial institutions has had a fatal triple stroke. We saw in quick sequence: market risk, operational risk, and credit risk measurement failures, covering practically all business models.
Financial Risk Modelling has suffered enormous setbacks in recent years, with all major strands of modelling (market, credit, operational risk) proven to have debilitating limitations. It is impossible to imagine a modern financial system that does not make extensive use of risk quantification tools, yet rebuilding confidence that these tools are fit-for-purpose will require significant changes. These need to improve governance, transparency, quality standards and in some areas even the development of completely new strands of modelling.