Related papers: A Dynamical Model for Operational Risk in Banks
The process of contagiousness spread modelling is well-known in epidemiology. However, the application of spread modelling to banking market is quite recent. In this work, we present a system of ordinary differential equations, simulating…
This paper investigates two mechanisms of financial contagion that are, firstly, the correlated exposure of banks to the same source of risk, and secondly the direct exposure of banks in the interbank market. It will consider a random…
This article provides an overview of model predictive control (MPC) frameworks for dynamic operation of nonlinear constrained systems. Dynamic operation is often an integral part of the control objective, ranging from tracking of reference…
This paper investigates the stakes of introducing probabilistic approaches for the management of power system's security. In real-time operation, the aim is to arbitrate in a rational way between preventive and corrective control, while…
Systemic risk is a rapidly developing area of research. Classical financial models often do not adequately reflect the phenomena of bubbles, crises, and transitions between them during credit cycles. To study very improbable events,…
The density hypothesis on random times becomes now a standard in modeling of risks. One of the basic reasons to introduce the density hypothesis is the desire to have a computable credit risk model. However, recent work shows that merely an…
Systemic risk refers to the risk that the financial system is susceptible to failures due to the characteristics of the system itself. The tremendous cost of systemic risk requires the design and implementation of tools for the efficient…
Dynamical systems with components whose sizes evolve according to multiplicative stochastic rules have been recently combined with entry and exit processes. We show that the assumptions usually made in modeling exits are at odds with the…
The need for control strategies that can address dynamic system uncertainty is becoming increasingly important. In this work, we propose a Model Predictive Control by quantifying the risk of failure in our system model. The proposed control…
The management of operational risk in the banking industry has undergone significant changes over the last decade due to substantial changes in operational risk environment. Globalization, deregulation, the use of complex financial products…
The negative externalities from an individual bank failure to the whole system can be huge. One of the key purposes of bank regulation is to internalize the social costs of potential bank failures via capital charges. This study proposes a…
This paper is concerned with a simulation study for a stochastic production network model, where the capacities of machines may change randomly. We introduce performance measures motivated by risk measures from finance leading to a…
Model risk in credit portfolio models is a serious issue for banks but has so far not been tackled comprehensively. We will demonstrate how to deal with uncertainty in all model parameters in an all-embracing, yet easy-to-implement way.
As a natural extension to the standard conformal prediction method, several conformal risk control methods have been recently developed and applied to various learning problems. In this work, we seek to control the conformal risk in…
In this work we study the individual strategies carried out by agents undergoing transactions in wealth exchange models. We analyze the role of risk propensity in the behavior of the agents and find a critical risk, such that agents with…
In performative prediction, predictions guide decision-making and hence can influence the distribution of future data. To date, work on performative prediction has focused on finding performatively stable models, which are the fixed points…
Interbank lending and borrowing occur when financial institutions seek to settle and refinance their mutual positions over time and circumstances. This interactive process involves money creation at the aggregate level. Coordination…
We develop a dynamic multi-agent model of an interbank payment system where banks choose their level of available funds on the basis of private payoff maximisation. The model consists of the repetition of a simultaneous move stage game with…
We study a credit risk model which captures effects of economic interactions on a firm's default probability. Economic interactions are represented as a functionally defined graph, and the existence of both cooperative, and competitive,…
Inspired by widely-used techniques of causal modelling in risk, failure, and accident analysis, this work discusses a compositional framework for risk modelling. Risk models capture fragments of the space of risky events likely to occur…