Related papers: Systemic Risk and Default Clustering for Large Fin…
Individual risk models need to capture possible correlations as failing to do so typically results in an underestimation of extreme quantiles of the aggregate loss. Such dependence modelling is particularly important for managing credit…
Diffusion on complex networks is a convenient framework to simulate a great variety of transport systems. The effects of failures in the network links may be used to cascade phenomena or the congestion formation in the system. A real time…
Death benefits are generally the largest cash flow item that affects financial statements of life insurers where some still do not have a systematic process to track and monitor death claims experience. In this article, we explore data…
The purpose of this paper is to advance the understanding of the conditions that give rise to flash crash contagion, particularly with respect to overlapping asset portfolio crowding. To this end, we designed, implemented, and assessed a…
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…
We propose a credit risk model for portfolios composed of green and brown loans, extending the ASRF framework via a two-factor copula structure. Systematic risk is modeled using potentially skewed distributions, allowing for asymmetric…
We consider a structural credit model for a large portfolio of credit risky assets where the correlation is due to a market factor. By considering the large portfolio limit of this system we show the existence of a density process for the…
Reasoning about causes and effects naturally arises in the engineering of safety-critical systems. A classical example is Fault Tree Analysis, a deductive technique used for system safety assessment, whereby an undesired state is reduced to…
Selective mitigation or selective hardening is an effective technique to obtain a good trade-off between the improvements in the overall reliability of a circuit and the hardware overhead induced by the hardening techniques. Selective…
The latest financial crisis has painfully revealed the dangers arising from a globally interconnected financial system. Conventional approaches based on the notion of the existence of equilibrium and those which rely on statistical…
We consider the problem of accurately measuring the credit risk of a portfolio consisting of loss exposures such as loans, bonds and other financial assets. We are particularly interested in the probability of large portfolio losses. We…
We introduce a solvable model of randomly growing systems consisting of many independent subunits. Scaling relations and growth rate distributions in the limit of infinite subunits are analysed theoretically. Various types of scaling…
It is shown that the axioms for coherent risk measures imply that whenever there is an asset in a portfolio that dominates the others in a given sample (which happens with finite probability even for large samples), then this portfolio…
We study multiple defaults where the global market information is modelled as progressive enlargement of filtrations. We shall provide a general pricing formula by establishing a relationship between the enlarged filtration and the…
We study the following distribution clustering problem: Given a hidden partition of $k$ distributions into two groups, such that the distributions within each group are the same, and the two distributions associated with the two clusters…
This paper investigates two fundamental descriptors of data, i.e., density distribution versus mass distribution, in the context of clustering. Density distribution has been the de facto descriptor of data distribution since the…
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 consider a network of bank holdings, where every holding has two subsidiaries of different types. A subsidiary can trade with another holding's subsidiary of the same type. Holdings support their subsidiaries up to a certain level when…
We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump--diffusion process for the risk factors, i.e. for the company assets. We also include correlations…
For credit risk management purposes in general, and for allocation of regulatory capital by banks in particular (Basel II), numerical assessments of the credit-worthiness of borrowers are indispensable. These assessments are expressed in…