Related papers: Modeling systemic risks in financial markets
Financial markets are a typical example of complex systems where interactions between constituents lead to many remarkable features. Here, we show that a pairwise maximum entropy model (or auto-logistic model) is able to describe switches…
Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk…
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…
The aim of this paper is to study a new methodological framework for systemic risk measures by applying deep learning method as a tool to compute the optimal strategy of capital allocations. Under this new framework, systemic risk measures…
Systemic risk measures are crucial for the stability of financial markets, yet classical formulations fail to capture the complexity of market volatility. We propose a new framework for systemic risk measurement on the variable-exponent…
We introduce a general model for the balance-sheet consistent valuation of interbank claims within an interconnected financial system. Our model represents an extension of clearing models of interdependent liabilities to account for the…
In this study, we investigate system-level emergent risks of interacting AI agents. The core contribution of this work is an exploratory scenario-based identification of these risks as well as their categorization. We consider a multitude…
The negative externalities from an individual bank failure to the whole system can be huge. One of the key purposes of bank regulation is to internalize the social costs of potential bank failures via capital charges. This study proposes a…
This paper investigates systemic risk measures for stochastic financial networks of explicitly modelled bilateral liabilities. We extend the notion of systemic risk measures from Biagini, Fouque, Fritelli and Meyer-Brandis (2019) to graph…
The interconnectedness of financial institutions affects instability and credit crises. To quantify systemic risk we introduce here the PD model, a dynamic model that combines credit risk techniques with a contagion mechanism on the network…
In normal times, it is assumed that financial institutions operating in non-overlapping sectors have complementary and distinct outcomes, typically reflected in mostly uncorrelated outcomes and asset returns. Such is the reasoning behind…
AI artificial intelligence brings about new quantitative techniques to assess the state of an economy. Here we describe a new measure for systemic risk: the Financial Risk Meter (FRM). This measure is based on the penalization parameter…
Complex risk is a critical factor for both intelligent systems and risk management. In this paper, we consider a special class of risk statistics, named complex risk statistics. Our result provides a new approach for addressing complex…
Systemic liquidity risk, defined by the IMF as "the risk of simultaneous liquidity difficulties at multiple financial institutions", is a key topic in macroprudential policy and financial stress analysis. Specialized models to simulate…
Systemic risk is a rapidly developing area of research. Classical financial models often do not adequately reflect the phenomena of bubbles, crises, and transitions between them during credit cycles. To study very improbable events,…
The econophysics approach to socio-economic systems is based on the assumption of their complexity. Such assumption inevitably lead to another assumption, namely that underlying interconnections within socio-economic systems, particularly…
We study cascades on a two-layer multiplex network, with asymmetric feedback that depends on the coupling strength between the layers. Based on an analytical branching process approximation, we calculate the systemic risk measured by the…
We review the recent approach of correlation based networks of financial equities. We investigate portfolio of stocks at different time horizons, financial indices and volatility time series and we show that meaningful economic information…
In this paper, we deal with risk evaluation and risk-averse optimization of complex distributed systems with general risk functionals. We postulate a novel set of axioms for the functionals evaluating the total risk of the system. We derive…
We introduce a novel class of systemic risk measures, the Vulnerability Conditional risk measures, which try to capture the "tail risk" of a risky position in scenarios where one or more market participants is experiencing financial…