Related papers: Markets Evolution After the Credit Crunch
This paper looks into the analysis of the long-range auto-correlations and cross-correlations in bond market. Based on Detrended Moving Average (DMA) method, empirical results present a clear evidence of long-range persistence that exists…
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…
According to the definition of the London Interbank Offered Rate (LIBOR), contributing banks should give fair estimates of their own borrowing costs in the interbank market. Between 2007 and 2009, several banks made inappropriate…
In this paper, we analyze the effect of a policy recommendation on the performance of an artificial interbank market. Financial institutions stipulate lending agreements following a public recommendation and their individual information.…
The present work studies and analyzes general defaultable OTC contract in presence of a contingent CSA, which is a theoretical counterparty risk mitigation mechanism of switching type that allows the counterparty of a general OTC contract…
Using a modified damped harmonic oscillator model equivalent to a model of market dynamics with price expectations, we analyze the reaction of financial markets to shocks. In order to do this, we gather data from indices of a variety of…
Throughout history, many countries have repeatedly experienced large swings in asset prices, which are usually accompanied by large fluctuations in macroeconomic activity. One of the characteristics of the period before major economic…
Various works have already showed that common shocks and cross-country financial linkages caused the banking systems of several countries to be highly interconnected with the result that during bad times, banking crises may arise…
Contagion is an extremely important topic in finance. Contagion is at the core of most major financial crises, in particular the 2008 financial crisis. Although various approaches to quantifying contagion have been proposed, many of them…
Based on an empirical analysis of the network structure of the Austrian inter-bank market, we study the flow of funds through the banking network following exogenous shocks to the system. These shocks are implemented by stochastic changes…
In the for-hire truckload market, firms often experience unexpected transportation cost increases due to contracted transportation service provider (carrier) load rejections. The dominant procurement strategy results in long-term,…
In this brief review, we critically examine the recent work done on correlation-based networks in financial systems. The structure of empirical correlation matrices constructed from the financial market data changes as the individual stock…
A growing number of contributions in the literature have identified a puzzle in the European carbon allowance (EUA) market. Specifically, a persistent cost-of-carry spread (C-spread) over the risk-free rate has been observed. We are the…
In this chapter we review some recent results on the dynamics of price formation in financial markets and its relations with the efficient market hypothesis. Specifically, we present the limit order book mechanism for markets and we…
This paper provides a formal econometric framework behind the newly developed difference-in-discontinuities design (DiDC). Despite its increasing use in applied research, there are currently limited studies of its properties. We formalize…
This article prices OTC derivatives with either an exogenously determined initial margin profile or endogenously approximated initial margin. In the former case, margin valuation adjustment (MVA) is defined as the liability-side discounted…
This review is a partial synthesis of the book ``Why stock market crash'' (Princeton University Press, January 2003), which presents a general theory of financial crashes and of stock market instabilities that his co-workers and the author…
We present a model describing the competition between information transmission and decision making in financial markets. The solution of this simple model is recalled, and possible variations discussed. It is shown numerically that despite…
Interbank contagion can theoretically exacerbate losses in a financial system and lead to additional cascade defaults during downturn. In this paper we produce default analysis using both regression and neural network models to verify…
In this paper, we assess how the stability of financial networks is affected by interconnectedness considering its tiniest variation: the edge. We compute the impact of edges as the percentage difference in the systemic risk (SR) of the…