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In this paper we study the effect of network structure between agents and objects on measures for systemic risk. We model the influence of sharing large exogeneous losses to the financial or (re)insuance market by a bipartite graph. Using…
The expansion of global production networks has raised many important questions about the interdependence among countries and how future changes in the world economy are likely to affect the countries' positioning in global value chains. We…
In the information-based approach to asset pricing the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market…
Modern macroeconomic theories were unable to foresee the last Great Recession and could neither predict its prolonged duration nor the recovery rate. They are based on supply-demand equilibria that do not exist during recessionary shocks.…
We examine how monetary shocks spread throughout an economic model characterized by sticky prices and general equilibrium, where the pricing strategies of firms are interlinked, fostering a mutually beneficial relationship. In this dynamic…
Economic models with input-output networks assume that firm or sector (unit) growth is driven by a weighted sum of trade partners' growth and an independently-drawn idiosyncratic shock. I show that the idiosyncratic risk assumption in a…
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,…
According to the volatility feedback effect, an unexpected increase in squared volatility leads to an immediate decline in the price-dividend ratio. In this paper, we consider the properties of stock price dynamics and option valuations…
We provide closed-form market equilibrium formula consolidating informational imperfections and investors beliefs. Based on Merton's model, we characterize the equilibrium expected excess returns vector with incomplete information. We then…
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…
In complex systems like financial market, risk tolerance of individuals is crucial for system resilience.The single-security price limit, designed as risk tolerance to protect investors by avoiding sharp price fluctuation, is blamed for…
We study overpricing in a repeated game between two representative agents: a market maker, who controls market liquidity, and a market taker, who chooses trade quantities. Market prices evolve through the endogenous price impact of trades…
Risks threatening modern societies form an intricately interconnected network that often underlies crisis situations. Yet, little is known about how risk materializations in distinct domains influence each other. Here we present an approach…
Technical trading represents a class of investment strategies for Financial Markets based on the analysis of trends and recurrent patterns of price time series. According standard economical theories these strategies should not be used…
Assessing the stability of economic systems is a fundamental research focus in economics, that has become increasingly interdisciplinary in the currently troubled economic situation. In particular, much attention has been devoted to the…
Assessing systemic risk in financial markets is of great importance but it often requires data that are unavailable or available at a very low frequency. For this reason, systemic risk assessment with partial information is potentially very…
In this paper we analyze the resilience of a network of banks to joint price fluctuations of the external assets in which they have shared exposures, and evaluate the worst-case effects of the possible default contagion. Indeed, when the…
This paper proposes a new way to model behavioral agents in dynamic macro-financial environments. Agents are described as neural networks and learn policies from idiosyncratic past experiences. I investigate the feedback between…
We present a model of adaptive regulatory networks consisting of a simple biologically-motivated rewiring procedure coupled to an elementary stability criterion. The resulting networks exhibit a characteristic stationary heavy-tailed degree…
Is the present economic and financial crisis similar to some previous one? It would be so nice to prove that universality laws exist for predicting such rare events under a minimum set of realistic hypotheses. First, I briefly recall…