Related papers: Densely Entangled Financial Systems
In this paper, we consider the problem of equal risk pricing and hedging in which the fair price of an option is the price that exposes both sides of the contract to the same level of risk. Focusing for the first time on the context where…
Stablecoins have historically depegged due from par to large sales, possibly of speculative nature, or poor reserve asset quality. Using a global game which addresses both concerns, we show that the selling pressure on stablecoin holders…
We develop a novel stress-test framework to monitor systemic risk in financial systems. The modular structure of the framework allows to accommodate for a variety of shock scenarios, methods to estimate interbank exposures and mechanisms of…
We model the default contagion process in a large heterogeneous financial network under the interventions of a regulator (a central bank) with only partial information which is a more realistic setting than most current literature. We…
We study Pareto-optimal risk sharing in economies with heterogeneous attitudes toward risk, where agents' preferences are modeled by distortion risk measures. Building on comonotonic and counter-monotonic improvement results, we show that…
We propose a model and an estimation technique to distinguish systemic risk and contagion in credit risk. The main idea is to assume, for a set of $d$ obligors, a set of $d$ idiosyncratic shocks and a shock that triggers the default of all…
Networking companies, especially the ones with the biggest market shares, tend to offer end to end solutions for their customers, with large discounts, that it would sound irrational to decline such offers, helping contractors make larger…
When dealing with large graphs, community detection is a useful data triage tool that can identify subsets of the network that a data analyst should investigate. In an adversarial scenario, the graph may be manipulated to avoid scrutiny of…
We consider the problem of decentralized hypothesis testing under communication constraints in a topology where several peripheral nodes are arranged in tandem. Each node receives an observation and transmits a message to its successor, and…
Interbank deposits (loans and credits) are quite common in banking system all over the world. Such interbank co-operation is profitable for banks but it can also lead to collective financial failures. In this paper we introduce a new model…
This paper studies a stochastic game theoretic approach to security and intrusion detection in communication and computer networks. Specifically, an Attacker and a Defender take part in a two-player game over a network of nodes whose…
The importance of adequately modeling credit risk has once again been highlighted in the recent financial crisis. Defaults tend to cluster around times of economic stress due to poor macro-economic conditions, {\em but also} by directly…
Increased coupling between critical infrastructure networks, such as power and communication systems, will have important implications for the reliability and security of these systems. To understand the effects of power-communication…
Whereas traditional credit scoring tends to employ only individual borrower- or loan-level predictors, it has been acknowledged for some time that connections between borrowers may result in default risk propagating over a network. In this…
Default risk calculus plays a crucial role in portfolio optimization when the risky asset is under threat of bankruptcy. However, traditional stochastic control techniques are not applicable in this scenario, and additional assumptions are…
Many mathematical models of interacting agents assume that individual interactions scale down in proportion to the network size, ensuring that the combined input received from the network does not diverge. In theoretical neuroscience,…
Over the past decade alternatives to traditional insurance and banking have grown in popularity. The desire to encourage local participation has lead products such as peer-to-peer insurance, reciprocal contracts, and decentralized finance…
Various social, financial, biological and technological systems can be modeled by interdependent networks. It has been assumed that in order to remain functional, nodes in one network must receive the support from nodes belonging to…
People are often divided into conformists and contrarians, the former tending to align to the majority opinion in their neighborhood and the latter tending to disagree with that majority. In practice, however, the contrarian tendency is…
Social networks of engagement sometimes dramatically collapse. A widely adopted paradigm to understand this catastrophe dynamics is the threshold model but previous work only considered the irreversible K-core pruning process and the…