Related papers: Large portfolio losses: A dynamic contagion model
As corporates and governments become more digital, they become vulnerable to various forms of cyber attack. Cyber insurance products have been used as risk management tools, yet their pricing does not reflect actual risk, including that of…
The recent financial crisis of 2008 and the 2011 indebtedness of Greece highlight the importance of understanding the structure of the global financial network. In this paper we set out to analyze and characterize this network, as captured…
We consider a mean-variance portfolio selection problem in a financial market with contagion risk. The risky assets follow a jump-diffusion model, in which jumps are driven by a multivariate Hawkes process with mutual-excitation effect. The…
We analyze a pair of diffusion equations which are derived in the infinite system--size limit from a microscopic, individual--based, stochastic model. Deviations from the conventional Fickian picture are found which ultimately relate to the…
We study stochastic particle systems on a complete graph and derive effective mean-field rate equations in the limit of diverging system size, which are also known from cluster aggregation models. We establish the propagation of chaos under…
Credit and liquidity risks represent main channels of financial contagion for interbank lending markets. On one hand, banks face potential losses whenever their counterparties are under distress and thus unable to fulfill their obligations.…
We consider weakly interacting diffusions on time varying random graphs. The system consists of a large number of nodes in which the state of each node is governed by a diffusion process that is influenced by the neighboring nodes. The…
We reverse engineer dynamics of financial contagion to find the scenario of smallest exogenous shock that, should it occur, would lead to a given final systemic loss. This reverse stress test can be used to identify the potential triggers…
We numerically study the dynamics of the SIR disease model on small-world networks by using a large-deviation approach. This allows us to obtain the probability density function of the total fraction of infected nodes and of the maximum…
This note presents a simulation method for investigating the relationship between porosity and particle size distribution in porous media characterization. The method simulates particle packing based on particle size distributions,…
This paper provides a general framework for modeling financial contagion in a system with obligations in multiple illiquid assets (e.g., currencies). In so doing, we develop a multi-layered financial network that extends the single network…
Large scale networks delineating collective dynamics often exhibit cascading failures across nodes leading to a system-wide collapse. Prominent examples of such phenomena would include collapse on financial and economic networks.…
Micro-structural models of contagion and systemic risk emphasize that shock propagation is inherently multi-channel, spanning counterparty exposures, short-term funding and roll-over risk, securities cross-holdings, and common-asset…
In this paper, we study the non-linear diffusion equation associated with a particle system where the common drift depends on the rate of absorption of particles at a boundary. We provide an interpretation as a structural credit risk model…
Complex contagions describe systems where the probability or rate of contagious transmission is a nonlinear function of the exposure to contagious agents. These models were first studied theoretically but have since been used to capture…
In this paper, we propose a method that provides a useful technique to compare relationship between risks involved that takes customer become defaulter and debt collection process that might make this defaulter recovered. Through estimation…
Current understanding holds that financial contagion is driven mainly by the system-wide interconnectedness of institutions. A distinction has been made between systematic and idiosyncratic channels of contagion, with shocks transmitted…
The 2008 financial crisis exposed fundamental vulnerabilities in interconnected banking systems, yet existing frameworks fail to integrate spatial propagation with network contagion mechanisms. This paper develops a unified spatial-network…
Default risk significantly affects the corporate policies of a firm. We develop a model in which a limited liability entity subject to Poisson default shock jointly sets its dividend policy and capital structure to maximize the expected…
We consider a large random network, in which the performance of a node depends upon that of its neighbours and some external random influence factors. This results in random vector valued fixed-point (FP) equations in large dimensional…