Related papers: Default Clustering in Large Pools: Large Deviation…
In many applications, data cluster. Failing to take the cluster structure into consideration generally leads to underestimated variances of point estimators and inflated type I errors in hypothesis tests. Many circumstance-dependent…
The incidence of rare events in fast-slow systems is investigated via analysis of the large deviation principle (LDP) that characterizes the likelihood and pathway of large fluctuations of the slow variables away from their mean behavior --…
Any limiting point process for the time normalized exceedances of high levels by a stationary sequence is necessarily compound Poisson under appropriate long range dependence conditions. Typically exceedances appear in clusters. The…
We consider a model of contagion in financial networks recently introduced in the literature, and we characterize the effect of a few features empirically observed in real networks on the stability of the system. Notably, we consider the…
According to theoretical models of valuing risky corporate securities, risk of default is primary component in overall yield spread. However, sizable empirical literature considers it otherwise by giving more importance to non-default risk…
Epidemic spreading and cascading failure are two important dynamical processes over complex networks. They have been investigated separately for a long history. But in the real world, these two dynamics sometimes may interact with each…
The instability of the financial system as experienced in recent years and in previous periods is often linked to credit defaults, i.e., to the failure of obligors to make promised payments. Given the large number of credit contracts, this…
In many cases of attacks or failures, memory effects play a significant role. Therefore, we present a model that not only considers the dependencies between nodes but also incorporates the memory effects of attacks. Our research…
We consider extended slow-fast systems of N interacting diffusions. The typical behavior of the empirical density is described by a nonlinear McKean-Vlasov equation depending on , the scaling parameter separating the time scale of the slow…
The one-dimensional contact process is analyzed by a cluster approximation. In this approach, the hierarchy of rate equations for the densities of finite length empty intervals are truncated under the assumption that adjacent intervals are…
We study a self-consistent approach to introduce higher-order effects in a branching process model of complex contagion on clustered networks. Branching processes operate over an infinite population such that they never circle back and…
Evaluation of default correlation is an important task in credit risk analysis. In many practical situations, it concerns the joint defaults of several correlated firms, the task that is reducible to a first passage time (FPT) problem. This…
Default risk significantly affects the corporate policies of a firm. We develop a model in which a limited liability entity subject to Poisson default shock jointly sets its dividend policy and capital structure to maximize the expected…
A statistical description of heavy particles suspended in incompressible rough self-similar flows is developed. It is shown that, differently from smooth flows, particles do not form fractal clusters. They rather distribute inhomogeneously…
We consider a structural default model in an interconnected banking network as in Lipton [International Journal of Theoretical and Applied Finance, 19(6), 2016], with mutual obligations between each pair of banks. We analyse the model…
Robustness and cascading failures in interdependent systems has been an active research field in the past decade. However, most existing works use percolation-based models where only the largest component of each network remains functional…
Modern network-like systems are usually coupled in such a way that failures in one network can affect the entire system. In infrastructures, biology, sociology, and economy, systems are interconnected and events taking place in one system…
We use the theory of large deviations to study the pricing of investment-grade tranches of synthetic CDO's. In this paper, we consider a heterogeneous pool of names. Our main tool is a large-deviations analysis which allows us to precisely…
The large deviation principle is established for the Poisson--Dirichlet distribution when the parameter $\theta$ approaches infinity. The result is then used to study the asymptotic behavior of the homozygosity and the Poisson--Dirichlet…
The number of particles detected in a nucleus-nucleus collision strongly depends on the impact parameter of the collision. Therefore, multiplicity fluctuations, as well as rapidity correlations of multiplicities, are dominated by impact…