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Systemic liquidity risk, defined by the IMF as "the risk of simultaneous liquidity difficulties at multiple financial institutions", is a key topic in macroprudential policy and financial stress analysis. Specialized models to simulate…
We construct a continuous time model for price-mediated contagion precipitated by a common exogenous stress to the banking book of all firms in the financial system. In this setting, firms are constrained so as to satisfy a risk-weight…
This paper develops the Jungle model in a credit portfolio framework. The Jungle model is able to model credit contagion, produce doubly-peaked probability distributions for the total default loss and endogenously generate quasi phase…
The theory of multilayer networks is in its early stages, and its development provides vital methods for understanding complex systems. Multilayer networks, in their multiplex form, have been introduced within the last three years to…
We investigate the computational aspects of the basket CDS pricing with counterparty risk under a credit contagion model of multinames. This model enables us to capture the systematic volatility increases in the market triggered by a…
This paper studies the effect of quarterly earnings reports on the stock price. The profitability of the stock is modelled by geometric Brownian diffusion and the Constant Elasticity of Variance model. We fit several variations of…
We give a detailed account of correlations between credit sector/quality and treasury curve factors, using the robust framework of the Barclays POINT Global Risk Model. Consistent with earlier studies, we find a strong negative correlation…
As data from monitored structures become increasingly available, the demand grows for it to be used efficiently to add value to structural operation and management. One way in which this can be achieved is to use structural response…
Valuing corporate bonds in systemic economies is challenging due to intricate webs of inter-institutional exposures. When a bank defaults, cascading losses propagate through the network, with payments determined by a system of fixed-point…
Modelling systems with networks has been a powerful approach to tame the complexity of several phenomena. Unfortunately, such an approach is often made difficult by the large number of variables to take into consideration. Methods of…
Whereas traditional credit scoring tends to employ only individual borrower- or loan-level predictors, it has been acknowledged for some time that connections between borrowers may result in default risk propagating over a network. In this…
In structural credit risk models, default events and the ensuing losses are both derived from the asset values at maturity. Hence it is of utmost importance to choose a distribution for these asset values which is in accordance with…
In biological materials, strong binding despite an applied load force is often based on clusters of dynamic bonds that share the load. Different macroscopic behaviors have been described depending on whether the load is shared locally or…
In this paper we study the implications of contingent payments on the clearing wealth in a network model of financial contagion. We consider an extension of the Eisenberg-Noe financial contagion model in which the nominal interbank…
The stability of a complex financial system may be assessed by measuring risk contagion between various financial institutions with relatively high exposure. We consider a financial network model using a bipartite graph of financial…
The proposed model is aimed to reveal important patterns in the behavior of a simplified financial system. The patterns could be detected as regular cycles consisting of debt bubbles and crises. Financial cycles have a well defined…
A load sharing system has several components and the failure of one component can affect the lifetime of the surviving components. Since component failure does not equate to system failure for different system designs, the analysis of the…
We develop a model to predict consumer default based on deep learning. We show that the model consistently outperforms standard credit scoring models, even though it uses the same data. Our model is interpretable and is able to provide a…
Managing risk at the aggregate level is crucial for banks and financial institutions as required by the Basel III framework. In this paper, we introduce discrete time Bayesian state space models with Poisson measurements to model aggregate…
This paper explores the dependence modeling of financial assets in a dynamic way and its critical role in measuring risk. Two new methods, called Accelerated Moving Window method and Bottom-up method are proposed to detect the change of…