Related papers: Modeling systemic risks in financial markets
We introduce a model for a market based economic system of cyber-risk valuation to correct fundamental problems of incentives within the information technology and information processing industries. We assess the makeup of the current day…
In this paper we propose a framework for assessing the risk associated with deploying a machine learning model in a specified environment. For that we carry over the risk definition from decision theory to machine learning. We develop and…
We propose a computational framework to quantify (measure) and to optimize the reliability of complex systems. The approach uses a graph representation of the system that is subject to random failures of its components (nodes and edges).…
Banks in the interbank network can not assess the true risks associated with lending to other banks in the network, unless they have full information on the riskiness of all the other banks. These risks can be estimated by using network…
As it is known in the finance risk and macroeconomics literature, risk-sharing in large portfolios may increase the probability of creation of default clusters and of systemic risk. We review recent developments on mathematical and…
We develop a system-theoretic framework for the structured analysis of distributed optimization algorithms with decomposable cost functions. We model such algorithms as a network of interacting dynamical systems and derive tests for…
In this paper, we introduce an impact centrality measure to evaluate shock propagation on financial networks capturing a notion of contagion and systemic risk contributions, permitting comparisons of these risks over time. In addition, we…
In this work we propose deep learning-based algorithms for the computation of systemic shortfall risk measures defined via multivariate utility functions. We discuss the key related theoretical aspects, with a particular focus on the…
In this paper we offer a novel type of network model which can capture the precise structure of a financial market based, for example, on empirical findings. With the attached stochastic framework it is further possible to study how an…
Providing a measure of market risk is an important issue for investors and financial institutions. However, the existing models for this purpose are per definition symmetric. The current paper introduces an asymmetric capital asset pricing…
This paper characterizes the probability of a market failure defined as the default of two or more globally systemically important banks (G-SIBs) in a small interval of time. The default probabilities of the G-SIBs are correlated through…
In this article, we review the mathematical modeling for the vascular system.
The market practice of extrapolating different term structures from different instruments lacks a rigorous justification in terms of cash flows structure and market observables. In this paper, we integrate our previous consistent theory for…
Modelling of contagion in interbank networks is discussed. A model taking into account bow-tie structure and dissasortativity of interbank networks is developed. The model is shown to provide a good quantitative description of the Russian…
We give an explicit algorithm and source code for constructing risk models based on machine learning techniques. The resultant covariance matrices are not factor models. Based on empirical backtests, we compare the performance of these…
In this paper, computational aspects of the panel aggregation problem are addressed. Motivated primarily by applications of risk assessment, an algorithm is developed for aggregating large corpora of internally incoherent probability…
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…
Identifying systemic risk patterns in geopolitical, economic, financial, environmental, transportation, epidemiological systems and their impacts is the key to risk management. This paper proposes a new nonlinear time series model:…
Model risk measures consequences of choosing a model in a class of possible alternatives. We find analytical and simulated bounds for payoff functions on classes of plausible alternatives of a given discrete model. We measure the impact of…
A financial market is a system resulting from the complex interaction between participants in a closed economy. We propose a minimal microscopic model of the financial market economy based on the real economy's symmetry constraint and…