Related papers: Modeling systemic risks in financial markets
In the paper a problem of risk measures on a discrete-time market model with transaction costs is studied. Strategy effectiveness and shortfall risk is introduced. This paper is a generalization of quantile hedging presented in [4].
We develop a structural default model for interconnected financial institutions in a probabilistic framework. For all possible network structures we characterize the joint default distribution of the system using Bayesian network…
The work deals with the risk assessment theory. An unitary risk algorithm is elaborated. The algorithm is based on parallel curves. The basic curve of risk is a hyperbolic curve, obtained as a multiplication between the probability of…
The financial crisis has dramatically demonstrated that the traditional approach to apply univariate monetary risk measures to single institutions does not capture sufficiently the perilous systemic risk that is generated by the…
Much research in systemic risk is focused on default contagion. While this demands an understanding of valuation, fewer articles specifically deal with the existence, the uniqueness, and the computation of equilibrium prices in structural…
In the aftermath of the financial crisis, the growing literature on financial networks has widely documented the predictive power of topological characteristics (e.g. degree centrality measures) to explain the systemic impact or systemic…
In recent years, it has become apparent that an isolated microprudential approach to capital adequacy requirements of individual institutions is insufficient. It can increase the homogeneity of the financial system and ultimately the cost…
With the increasing complexity of financial markets and rapid growth in data volume, traditional risk monitoring methods no longer suffice for modern financial institutions. This paper designs and optimizes a risk monitoring system based on…
We review the state of the art of clustering financial time series and the study of their correlations alongside other interaction networks. The aim of this review is to gather in one place the relevant material from different fields, e.g.…
Systemic financial risk refers to the simultaneous failure or destabilization of multiple financial institutions, often triggered by contagion mechanisms or common exposures to shocks. In this paper, we present a dynamical model of bank…
We address the statistical estimation of composite functionals which may be nonlinear in the probability measure. Our study is motivated by the need to estimate coherent measures of risk, which become increasingly popular in finance,…
This work proposes an augmented variant of DebtRank with uncertainty intervals as a method to investigate and assess systemic risk in financial networks, in a context of incomplete data. The algorithm is tested against a default contagion…
The financial market is a complex dynamical system composed of a large variety of intricate relationships between several entities, such as banks, corporations and institutions. At the heart of the system lies the stock exchange mechanism,…
We propose a portfolio approach for operational risk quantification based on a class of analytical models from which we derive new results on the correlation problem. In particular, we show that uniform correlation is a robust assumption…
We propose some machine-learning-based algorithms to solve hedging problems in incomplete markets. Sources of incompleteness cover illiquidity, untradable risk factors, discrete hedging dates and transaction costs. The proposed algorithms…
Measurement and management of credit concentration risk is critical for banks and relevant for micro-prudential requirements. While several methods exist for measuring credit concentration risk within institutions, the systemic effect of…
It is often the case that risk assessment and prognostics are viewed as related but separate tasks. This chapter describes a risk-based approach to prognostics that seeks to provide a tighter coupling between risk assessment and fault…
As the complexity and dynamism of financial markets continue to grow, traditional financial risk prediction methods increasingly struggle to handle large datasets and intricate behavior patterns. This paper explores the feasibility and…
The dynamic network of relationships among corporations underlies cascading economic failures including the current economic crisis, and can be inferred from correlations in market value fluctuations. We analyze the time dependence of the…
Air transportation has been becoming a major part of transportation infrastructure worldwide. Hence the study of the Airports Networks, the backbone of air transportation, is becoming increasingly important. In complex systems domain,…