Related papers: Systemic Risk and Default Clustering for Large Fin…
Interbank contagion can theoretically exacerbate losses in a financial system and lead to additional cascade defaults during downturn. In this paper we produce default analysis using both regression and neural network models to verify…
Network theory proved recently to be useful in the quantification of many properties of financial systems. The analysis of the structure of investment portfolios is a major application since their eventual correlation and overlap impact the…
We propose a model for the credit and liquidity risks faced by clearing members of Central Counterparty Clearing houses (CCPs). This model aims to capture the features of: gap risk; feedback between clearing member default, market…
In structural credit risk models, default events and the ensuing losses are both derived from the asset values at maturity. Hence it is of utmost importance to choose a distribution for these asset values which is in accordance with…
An analysis of the stylized facts in financial time series is carried out. We find that, instead of the heavy tails in asset return distributions, the slow decay behaviour in autocorrelation functions of absolute returns is actually…
Evaluation of systemic risk in networks of financial institutions in general requires information of inter-institution financial exposures. In the framework of Debt Rank algorithm, we introduce an approximate method of systemic risk…
We consider the problem of risk diversification in complex networks. Nodes represent e.g. financial actors, whereas weighted links represent e.g. financial obligations (credits/debts). Each node has a risk to fail because of losses…
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…
Distributed processing over networks relies on in-network processing and cooperation among neighboring agents. Cooperation is beneficial when agents share a common objective. However, in many applications agents may belong to different…
In this paper, we propose a method that provides a useful technique to compare relationship between risks involved that takes customer become defaulter and debt collection process that might make this defaulter recovered. Through estimation…
Robust clustering of high-dimensional data is an important topic because clusters in real datasets are often heavy-tailed and/or asymmetric. Traditional approaches to model-based clustering often fail for high dimensional data, e.g., due to…
We estimate generic statistical properties of a structural credit risk model by considering an ensemble of correlation matrices. This ensemble is set up by Random Matrix Theory. We demonstrate analytically that the presence of correlations…
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Under fairly general assumptions for the distribution of the total net…
We consider a dynamic model of interconnected banks. New banks can emerge, and existing banks can default, creating a birth-and-death setup. Microscopically, banks evolve as independent geometric Brownian motions. Systemic effects are…
Clustering is a widely used unsupervised learning method for finding structure in the data. However, the resulting clusters are typically presented without any guarantees on their robustness; slightly changing the used data sample or…
Risk control and optimal diversification constitute a major focus in the finance and insurance industries as well as, more or less consciously, in our everyday life. We present a discussion of the characterization of risks and of the…
he evaluation of the impact of actions undertaken is essential in management. This paper assesses the impact of efforts considered to mitigate risk and create safe environments on a global scale. We measure this impact by looking at the…
Banking system crises are complex events that in a short span of time can inflict extensive damage to banks themselves and to the external economy. The crisis literature has so far identified a number of distinct effects or channels that…
The probability minimizing problem of large losses of portfolio in discrete and continuous time models is studied. This gives a generalization of quantile hedging presented in [3].
We develop a finite horizon continuous time market model, where risk averse investors maximize utility from terminal wealth by dynamically investing in a risk-free money market account, a stock written on a default-free dividend process,…