Related papers: Credit Default Swaps Drawup Networks: Too Tied To …
The importance of adequately modeling credit risk has once again been highlighted in the recent financial crisis. Defaults tend to cluster around times of economic stress due to poor macro-economic conditions, {\em but also} by directly…
In this paper, we employ Credit Default Swaps (CDS) to model the joint and conditional distress probabilities of banks in Europe and the U.S. using factor copulas. We propose multi-factor, structured factor, and factor-vine models where the…
The 2008 financial crisis has been attributed to "excessive complexity" of the financial system due to financial innovation. We employ computational complexity theory to make this notion precise. Specifically, we consider the problem of…
The interconnectedness of financial institutions affects instability and credit crises. To quantify systemic risk we introduce here the PD model, a dynamic model that combines credit risk techniques with a contagion mechanism on the network…
A stream of unstructured news can be a valuable source of hidden relations between different entities, such as financial institutions, countries, or persons. We present an approach to continuously collect online news, recognize relevant…
We study insolvency cascades in an interbank system when banks are allowed to insure their loans with credit default swaps (CDS) sold by other banks. We show that, by properly shifting financial exposures from one institution to another, a…
Through a long-period analysis of the inter-temporal relations between the French markets for credit default swaps (CDS), shares and bonds between 2001 and 2008, this article shows how a financial innovation like CDS could heighten…
The 2023 U.S. banking crisis propagated not through direct financial linkages but through a high-frequency, information-based contagion channel. This paper moves beyond exploration analysis to test the "too-similar-to-fail" hypothesis,…
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…
The global financial crisis in 2007-2009 demonstrated that systemic risk can spread all over the world through a complex web of financial linkages, yet we still lack fundamental knowledge about the evolution of the financial web. In…
Companies do not operate in a vacuum. As companies move towards an increasingly specialized production function and their reach is becoming truly global, their aptitude in managing and shaping their inter-organizational network is a…
Measurement and management of credit concentration risk is critical for banks and relevant for micro-prudential requirements. While several methods exist for measuring credit concentration risk within institutions, the systemic effect of…
One of the most challenging aspects in the analysis and modelling of financial markets, including Credit Default Swap (CDS) markets, is the presence of an emergent, intermediate level of structure standing in between the microscopic…
This paper considers the dynamics of edges in a network. The Dynamic Bond Percolation (DBP) process models, through stochastic local rules, the dependence of an edge $(a,b)$ in a network on the states of its neighboring edges. Unlike…
Network theory proved recently to be useful in the quantification of many properties of financial systems. The analysis of the structure of investment portfolios is a major application since their eventual correlation and overlap impact the…
The 2008 financial crisis illustrated the need for a thorough, functional understanding of systemic risk in strongly interconnected financial structures. Dynamic processes on complex networks being intrinsically difficult, most recent…
We study computational problems in financial networks of banks connected by debt contracts and credit default swaps (CDSs). A main problem is to determine \emph{clearing} payments, for instance right after some banks have been exposed to a…
We study the incentives of banks in a financial network, where the network consists of debt contracts and credit default swaps (CDSs) between banks. One of the most important questions in such a system is the problem of deciding which of…
This paper investigates the stability and stabilization of diffusively coupled network dynamical systems. We leverage Lyapunov methods to analyze the role of coupling in stabilizing or destabilizing network systems. We derive critical…
The theory of complex networks and of disordered systems is used to study the stability and dynamical properties of a simple model of material flow networks defined on random graphs. In particular we address instabilities that are…