Related papers: Credit contagion and risk management with multiple…
We consider the problem of modelling the term structure of defaultable bonds, under minimal assumptions on the default time. In particular, we do not assume the existence of a default intensity and we therefore allow for the possibility of…
We study systemic default contagion in sparse financial networks and develop a framework for deciding when aggregate exposure matrices are reliable and when node-level network information changes tail risk and control design. The first…
Financial networks are characterized by complex structures of mutual obligations. These obligations are fulfilled entirely or in part (when defaults occur) via a mechanism called clearing, which determines a set of payments that settle the…
Interbank deposits (loans and credits) are quite common in banking system all over the world. Such interbank co-operation is profitable for banks but it can also lead to collective financial failures. In this paper we introduce a new model…
We present two methodologies on the estimation of rating transition probabilities within Markov and non-Markov frameworks. We first estimate a continuous-time Markov chain using discrete (missing) data and derive a simpler expression for…
We introduce the general arbitrage-free valuation framework for counterparty risk adjustments in presence of bilateral default risk, including default of the investor. We illustrate the symmetry in the valuation and show that the adjustment…
Under the International Financial Reporting Standards (IFRS) 9, credit losses ought to be recognised timeously and accurately. This requirement belies a certain degree of dynamicity when estimating the constituent parts of a credit loss…
Price-mediated contagion occurs when a positive feedback loop develops following a drop in asset prices which forces banks and other financial institutions to sell their holdings. Prior studies of such events fix the level of market…
This paper presents comparison results and establishes risk bounds for credit portfolios within classes of Bernoulli mixture models, assuming conditionally independent defaults that are stochastically increasing with a common risk factor.…
The question we address here is of whether phenomena of collective bankruptcies are related to self-organized criticality. In order to answer it we propose a simple model of banking networks based on the random directed percolation. We…
We develop a model for contagion in reinsurance networks by which primary insurers' losses are spread through the network. Our model handles general reinsurance contracts, such as typical excess of loss contracts. We show that simpler…
Measuring the corporate default risk is broadly important in economics and finance. Quantitative methods have been developed to predictively assess future corporate default probabilities. However, as a more difficult yet crucial problem,…
We develop a model for the dynamic evolution of default-free and defaultable interest rates in a LIBOR framework. Utilizing the class of affine processes, this model produces positive LIBOR rates and spreads, while the dynamics are…
This paper considers the problem of measuring the credit risk in portfolios of loans, bonds, and other instruments subject to possible default under multi-factor models. Due to the amount of the portfolio, the heterogeneous effect of…
Supply chain disruptions constitute an often underestimated risk for financial stability. As in financial networks, systemic risks in production networks arises when the local failure of one firm impacts the production of others and might…
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…
Financial contagion has been widely recognized as a fundamental risk to the financial system. Particularly potent is price-mediated contagion, wherein forced liquidations by firms depress asset prices and propagate financial stress,…
Individual risk models need to capture possible correlations as failing to do so typically results in an underestimation of extreme quantiles of the aggregate loss. Such dependence modelling is particularly important for managing credit…
Credit default prediction is a tabular learning problem with severe class imbalance, heterogeneous features, and tight latency budgets. Tabular Foundation Models (TFMs) approach this problem through in-context learning, which makes their…
In this paper we propose a new nonparametric approach to interacting failing systems (FS), that is systems whose probability of failure is not negligible in a fixed time horizon, a typical example being firms and financial bonds. The main…