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I develop a tractable adverse-selection model comparing secured bank loans and bonds when both pledge collateral but differ in effective liquidation efficiency. A small wedge in recovery rates generates coexistence, a sharp bank-bond…
Multivariate probability density functions of returns are constructed in order to model the empirical behavior of returns in a financial time series. They describe the well-established deviations from the Gaussian random walk, such as an…
Distributed systems can be subject to various kinds of partial failures, therefore building fault-tolerance or failure mitigation mechanisms for distributed systems remains an important domain of research. In this paper, we present a…
A three-dimensional extension of the structural default model with firms' values driven by correlated diffusion processes is presented. Green's function based semi-analytical methods for solving the forward calibration problem and backward…
This paper consider the problem of determining the reliability of a software system which can be decomposed in a number of modules. We have derived the expression of the reliability of a system using the Markovian model for the transfer of…
We present a multilayer network model for credit risk assessment. Our model accounts for multiple connections between borrowers (such as their geographic location and their economic activity) and allows for explicitly modelling the…
Microfinance, despite its significant potential for poverty reduction, is facing sustainability hardships due to high default rates. Although many methods in regular finance can estimate credit scores and default probabilities, these…
We analyse the ruin probabilities for a renewal insurance risk process with inter-arrival time distributions depending on the claims that arrived within a fixed (past) time window. This dependence could be explained through a regenerative…
Several collective risk models have recently been proposed by relaxing the widely used but controversial assumption of independence between claim frequency and severity. Approaches include the bivariate copula model, random effect model,…
In credit risk literature, the existence of an equivalent martingale measure is stipulated as one of the main assumptions in the hazard process model. Here we show by construction the existence of a measure that turns the discounted stock…
In a dual risk model, the premiums are considered as the costs and the claims are regarded as the profits. The surplus can be interpreted as the wealth of a venture capital, whose profits depend on research and development. In most of the…
The DebtRank algorithm has been increasingly investigated as a method to estimate the impact of shocks in financial networks, as it overcomes the limitations of the traditional default-cascade approaches. Here we formulate a dynamical…
In this paper we aim to improve existing empirical exchange rate models by accounting for uncertainty with respect to the underlying structural representation. Within a flexible Bayesian non-linear time series framework, our modeling…
We study multiple defaults where the global market information is modelled as progressive enlargement of filtrations. We shall provide a general pricing formula by establishing a relationship between the enlarged filtration and the…
We propose a new model of the liquidity driven banking system focusing on overnight interbank loans. This significant branch of the interbank market is commonly neglected in the banking system modeling and systemic risk analysis. We…
Although Fault Tree and Event Tree analysis are still today the standard approach to system safety analysis for many engineering sectors, these techniques lack the capabilities of fully capturing the realistic, dynamic behaviour of complex…
As machine learning models are increasingly being employed to make consequential decisions in real-world settings, it becomes critical to ensure that individuals who are adversely impacted (e.g., loan denied) by the predictions of these…
Recent studies have identified long-range dependence as a key feature in the dynamics of both mortality and interest rates. Building on this insight, we develop a novel bi-variate stochastic framework based on mixed fractional Brownian…
The standard intensity-based approach for modeling defaults is generalized by making the deterministic term structure of the survival probability stochastic via a common jump process. The survival copula of the vector of default times is…
This paper proposes a simple technical approach for the analytical derivation of Point-in-Time PD (probability of default) forecasts, with minimal data requirements. The inputs required are the current and future Through-the-Cycle PDs of…