Related papers: Default clustering in large portfolios: Typical ev…
We study the pricing and the hedging of claim {\psi} which depends on the default times of two firms A and B. In fact, we assume that, in the market, we can not buy or sell any defaultable bond of the firm B but we can only trade…
This paper studies the stochastic modeling of market drawdown events and the fair valuation of insurance contracts based on drawdowns. We model the asset drawdown process as the current relative distance from the historical maximum of the…
Mortgage default rates, on the one hand, serve as a measure of economic health to support decision-making by insurance companies, and on the other hand, is a key risk factor in the asset-liability management (ALM) practice, as mortgage…
We propose a class of stochastic models for a dynamics of limit order book with different type of liquidities. Within this class of models we study the one where a spread decreases uniformly, belonging to the class of processes known as a…
A simple banking network model is proposed which features multiple waves of bank defaults and is analytically solvable in the limiting case of an infinitely large homogeneous network. The model is a collection of nodes representing…
We consider the optimal investment problem when the traded asset may default, causing a jump in its price. For an investor with constant absolute risk aversion, we compute indifference prices for defaultable bonds, as well as a price for…
We consider a structural default model in an interconnected banking network as in Lipton [International Journal of Theoretical and Applied Finance, 19(6), 2016], with mutual obligations between each pair of banks. We analyse the model…
We study a dynamical model of interconnected firms which allows for certain market imperfections and frictions, restricted here to be myopic price forecasts and slow adjustment of production. Whereas the standard rational equilibrium is…
In the past few decades considerable effort has been expended in characterizing and modeling financial time series. A number of stylized facts have been identified, and volatility clustering or the tendency toward persistence has emerged as…
A pressing challenge for coming decades is sustainable and just management of large-scale common-pool resources including the atmosphere, biodiversity and public services. This poses a difficult collective action problem because such…
A simple model for simulating tug of war game as varying the player number in a team is discussed to identify the slow pace of fast change. This model shows that a large number of information sources leads slow change for the system. Also,…
We consider a financial market with a stock exposed to a counterparty risk inducing a drop in the price, and which can still be traded after this default time. We use a default-density modeling approach, and address in this incomplete…
This paper considers the portfolio management problem of optimal investment, consumption and life insurance. We are concerned with time inconsistency of optimal strategies. Natural assumptions, like different discount rates for consumption…
We study the pricing of credit derivatives with asymmetric information. The managers have complete information on the value process of the firm and on the default threshold, while the investors on the market have only partial observations,…
In this paper, we propose a dynamical model to capture cascading failures among interconnected organizations in the global financial system. Failures can take the form of bankruptcies, defaults, and other insolvencies. The network that…
How do large deviation events in a stationary process cluster? The answer depends not only on the type of large deviations, but also on the length of memory in the process. Somewhat unexpectedly, it may also depend on the tails of the…
In our model, private actors with interbank cash flows similar to, but nore general than (Carmona, Fouque, Sun, 2013) borrow from the outside economy at a certain interest rate, controlled by the central bank, and invest in risky assets.…
Modern distributed systems rely on consensus protocols to build a fault-tolerant-core upon which they can build applications. Consensus protocols are correct under a specific failure model, where up to $f$ machines can fail. We argue that…
Motivated by the study of a parasite infection in a cell line, we introduce a general class of Markov processes for the modelling of population dynamics. The population process evolves as a diffusion with positive jumps whose rate is a…
In this paper, we consider the problem of optimization of a portfolio consisting of securities. An investor with an initial capital, is interested in constructing a portfolio of securities. If the prices of securities change, the investor…