Related papers: A Dynamical Model for Operational Risk in Banks
As economic entities become increasingly interconnected, a shock in a financial network can provoke significant cascading failures throughout the system. To study the systemic risk of financial systems, we create a bi-partite banking…
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.…
This paper considers the problem of optimal liquidation of a position in a risky security in a financial market, where price evolution are risky and trades have an impact on price as well as uncertainty in the filling orders. The problem is…
Consider an insurance company exposed to a stochastic economic environment that contains two kinds of risk. The first kind is the insurance risk caused by traditional insurance claims, and the second kind is the financial risk resulting…
The banking systems that deal with risk management depend on underlying risk measures. Following the Basel II accord, there are two separate methods by which banks may determine their capital requirement. The Value at Risk measure plays an…
The inter-temporal consumption flexibility of commercial buildings can be harnessed to improve the energy efficiency of buildings, or to provide ancillary service to the power grid. To do so, a predictive model of the building's thermal…
Bank crisis is challenging to define but can be manifested through bank contagion. This study presents a comprehensive framework grounded in nonlinear time series analysis to identify potential early warning signals (EWS) for impending…
All people have to make risky decisions in everyday life. And we do not know how true they are. But is it possible to mathematically assess the correctness of our choice? This article discusses the model of decision making under risk on the…
This paper examines the pricing of short-term and long-term dynamic network risk in the cross-section of stock returns. Stocks with high sensitivities to dynamic network risk earn lower returns. We rationalize our finding with economic…
We study the causes and consequences of bank runs using a novel dataset of bank runs in the United States from 1863 to 1934. Applying large language models to historical newspapers, we identify 3,421 runs on individual banks. The resulting…
We study the mean field approximation of a recent model of cascades on networks relevant to the investigation of systemic risk control in financial networks. In the model, the hypothesis of a trend reinforcement in the stochastic process…
Open Banking powered machine learning applications require novel robustness approaches to deal with challenging stress and failure scenarios. In this paper we propose an hierarchical fallback architecture for improving robustness in high…
Spillover of economic outcomes often arises over multiple networks, and distinguishing their separate roles is important in empirical research. For example, the direction of spillover between two groups (such as banks and industrial sectors…
The sensitivity to risk that most people (hence, financial operators) feel affects the dynamics of financial transactions. Here we present an approach to this problem based on a current generalization of Boltzmann-Gibbs statistical…
Often models for understanding the impact of management practices on retail performance are developed under the assumption of stability, equilibrium and linearity, whereas retail operations are considered in reality to be dynamic,…
Following several episodes of financial market turmoil in recent decades, changes in systemic risk have drawn growing attention. Therefore, we propose surveillance schemes for systemic risk, which allow to detect misspecified systemic risk…
We study the risk assessment of uncertain cash flows in terms of dynamic convex risk measures for processes as introduced in Cheridito, Delbaen, and Kupper (2006). These risk measures take into account not only the amounts but also the…
This paper is an original attempt to understand the foundations of economic reasoning. It endeavors to rigorously define the relationship between subjective interpretations and objective valuations of such interpretations in the context of…
A dynamical model is introduced for the formation of a bullish or bearish trends driving an asset price in a given market. Initially, each agent decides to buy or sell according to its personal opinion, which results from the combination of…
A probabilistic model describes a system in its observational state. In many situations, however, we are interested in the system's response under interventions. The class of structural causal models provides a language that allows us to…