Related papers: Trust! Why it Has Been Lost and How to Regain It
Trust lies at the crux of most economic transactions, with credit markets being a notable example. Drawing on insights from the literature on coordination games and network growth, we develop a simple model to clarify how trust breaks down…
The financial crisis of 2008, which started with an initially well-defined epicenter focused on mortgage backed securities (MBS), has been cascading into a global economic recession, whose increasing severity and uncertain duration has led…
The credit crisis roiling the world's financial markets will likely take years and entire careers to fully understand and analyze. A short empirical investigation of the current trends, however, demonstrates that the losses in certain…
A financial system contains many elements networked by their relationships. Extensive works show that topological structure of the network stores rich information on evolutionary behaviors of the system such as early warning signals of…
We argue that the present crisis and stalling economy continuing since 2007 are rooted in the delusionary belief in policies based on a "perpetual money machine" type of thinking. We document strong evidence that, since the early 1980s,…
The international financial system is currently not yet prepared to face a foreseeable crisis mainly motivated by the dichotomy between the real economy and the virtual economy. Skepticism is widespread even when it comes to investments in…
The instability of the financial system as experienced in recent years and in previous periods is often linked to credit defaults, i.e., to the failure of obligors to make promised payments. Given the large number of credit contracts, this…
We briefly review the well-known risks, weaknesses and limitations of spreadsheets and then introduce some more. We review and slightly extend our previous work on the importance and criticality of spreadsheets in the City of London,…
The fragility of financial systems was starkly demonstrated in early 2023 through a cascade of major bank failures in the United States, including the second, third, and fourth largest collapses in the US history. The highly interdependent…
Following the financial crisis of 2007-2008, a deep analogy between the origins of instability in financial systems and complex ecosystems has been pointed out: in both cases, topological features of network structures influence how easily…
This review is a partial synthesis of the book ``Why stock market crash'' (Princeton University Press, January 2003), which presents a general theory of financial crashes and of stock market instabilities that his co-workers and the author…
Financial global crisis has devastating impacts to economies since early XX century and continues to impose increasing collateral damages for governments, enterprises, and society in general. Up to now, all efforts to obtain efficient…
Is the present economic and financial crisis similar to some previous one? It would be so nice to prove that universality laws exist for predicting such rare events under a minimum set of realistic hypotheses. First, I briefly recall…
Why do banks fail? We create a panel covering most commercial banks from 1863 through 2024 to study the history of failing banks in the United States. Failing banks are characterized by rising asset losses, deteriorating solvency, and an…
Trust mechanisms diverge between centralized and decentralized exchanges, representing distinct sociotechnical governance paradigms. However, quantifying trust dynamics and their redistribution between these architectures remains…
This paper intends to present the opportunities emerging for the national economy, out of the financial crisis. In particular the management of those, which arise from the commercial real estate owned property sector, defined by the author…
We explore a model of the interaction between banks and outside investors in which the ability of banks to issue inside money (short-term liabilities believed to be convertible into currency at par) can generate a collapse in asset prices…
Recent developments in the global liberalization of equity and currency markets, coupled to advances in trading technologies, are making markets increasingly interdependent. This increased fluidity raises questions about the stability of…
Bank failures can stem from runs on otherwise solvent banks or from losses that render banks insolvent, regardless of withdrawals. Disentangling the relative importance of liquidity and solvency in explaining bank failures is central to…
In normal times, it is assumed that financial institutions operating in non-overlapping sectors have complementary and distinct outcomes, typically reflected in mostly uncorrelated outcomes and asset returns. Such is the reasoning behind…