Related papers: Dynamic Interaction Between Asset Prices and Bank …
To identify emerging interdependencies between traded stocks we investigate the behavior of the stocks of FTSE 100 companies in the period 2000-2015, by looking at daily stock values. Exploiting the power of information theoretical measures…
We describe a simple model for speculative trading based on adaptive behavior of economic agents.The adaptive behavior is expressed through a feedback mechanism for changing agents' stock-to-bond ratios, depending on the past performance of…
This paper studies a risk-sensitive decision-making problem under uncertainty. It considers a decision-making process that unfolds over a fixed number of stages, in which a decision-maker chooses among multiple alternatives, some of which…
Decisions taken in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market therefore provides a rich environment to study how people take…
Research has shown banks match interest income and expense betas, and thereby obtain net interest income margins which are insensitive to changes in short-term interest rates. The present analysis extends this research in a number of ways.…
We study a model in which two players with opposing interests try to alter a status quo through instability-generating actions. We show that instability can be used to secure longer-term durable changes, even if it is costly to generate and…
The document discusses the financial climate risk in the context of the banking industry, emphasizing the need for a comprehensive understanding of climate change across different spatial and temporal scales. It highlights the challenges in…
When banks choose similar investment strategies the financial system becomes vulnerable to common shocks. We model a simple financial system in which banks decide about their investment strategy based on a private belief about the state of…
We explore the effect of discounting and experimentation in a simple model of interacting adaptive agents. Agents belong to either of two types and each has to decide whether to participate a game or not, the game being profitable when…
When banks extend loans to each other, they generate a negative externality in the form of systemic risk. They create a network of interbank exposures by which they expose other banks to potential insolvency cascades. In this paper, we show…
We study a simple, solvable model that allows us to investigate effects of credit contagion on the default probability of individual firms, in both portfolios of firms and on an economy wide scale. While the effect of interactions may be…
Since the latest financial crisis, the idea of systemic risk has received considerable interest. In particular, contagion effects arising from cross-holdings between interconnected financial firms have been studied extensively. Drawing…
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…
As demonstrated during the recent financial crisis, regulators require additional analytical tools to assess systemic risk in the financial sector. This paper describes one such tool; namely a novel market modeling and analysis capability.…
We study the emergence of instabilities in a stylized model of a financial market, when different market actors calculate prices according to different (local) market measures. We derive typical properties for ensembles of large random…
How, and to what extent, does an interconnected financial system endogenously amplify external shocks? This paper attempts to reconcile some apparently different views emerged after the 2008 crisis regarding the nature and the relevance of…
Common asset holdings are widely believed to have been the primary vector of contagion in the recent financial crisis. We develop a network approach to the amplification of financial contagion due to the combination of overlapping…
We show that the emergence of systemic risk in complex systems can be understood from the evolution of functional networks representing interactions inferred from fluctuation correlations between macroscopic observables. Specifically, we…
The European sovereign debt crisis has impaired many European banks. The distress on the European banks may transmit worldwide, and result in a large-scale knock-on default of financial institutions. This study presents a computer…
Node centrality is one of the most important and widely used concepts in the study of complex networks. Here, we extend the paradigm of node centrality in financial and economic networks to consider the changes of node "importance" produced…