Related papers: Dynamic Interaction Between Asset Prices and Bank …
In this paper we present a continuous time dynamical model of heterogeneous agents interacting in a financial market where transactions are cleared by a market maker. The market is composed of fundamentalist, trend following and contrarian…
An asset network systemic risk (ANWSER) model is presented to investigate the impact of how shadow banks are intermingled in a financial system on the severity of financial contagion. Particularly, the focus of this study is the impact of…
We propose a model of inter-bank lending and borrowing which takes into account clearing debt obligations. The evolution of log-monetary reserves of $N$ banks is described by coupled diffusions driven by controls with delay in their drifts.…
We formulate and analyze a multi-agent model for the evolution of individual and systemic risk in which the local agents interact with each other through a central agent who, in turn, is influenced by the mean field of the local agents. The…
In this paper, we propose a dynamical model to capture cascading failures among interconnected organizations in the global financial system. Failures can take the form of bankruptcies, defaults, and other insolvencies. The network that…
Following several episodes of financial market turmoil in recent decades, changes in systemic risk have drawn growing attention. Therefore, we propose surveillance schemes for systemic risk, which allow to detect misspecified systemic risk…
We address microscopic, agent based, and macroscopic, stochastic, modeling of the financial markets combining it with the exogenous noise. The interplay between the endogenous dynamics of agents and the exogenous noise is the primary…
We investigate possible origins of trends using a deterministic threshold model, where we refer to long-term variabilities of price changes (price movements) in financial markets as trends. From the investigation we find two phenomena. One…
We introduce and study a non-equilibrium continuous-time dynamical model of the price of a single asset traded by a population of heterogeneous interacting agents in the presence of uncertainty and regulatory constraints. The model takes…
The DebtRank algorithm has been increasingly investigated as a method to estimate the impact of shocks in financial networks, as it overcomes the limitations of the traditional default-cascade approaches. Here we formulate a dynamical…
We define and study a rather complex market model, inspired from the Santa Fe artificial market and the Minority Game. Agents have different strategies among which they can choose, according to their relative profitability, with the…
In this paper, we deal with an axiomatic approach to default risk. We introduce the notion of a default risk measure, which generalizes the classical probability of default (PD), and allows to incorporate model risk in various forms. We…
With negative growth in real production in many countries and debt levels which become an increasing burden on developed societies, the calls for a change in economic policy and even the monetary system become louder and increasingly…
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…
Price-mediated contagion occurs when a positive feedback loop develops following a drop in asset prices which forces banks and other financial institutions to sell their holdings. Prior studies of such events fix the level of market…
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…
Different models of capital exchange among economic agents have been proposed recently trying to explain the emergence of Pareto's wealth power law distribution. One important factor to be considered is the existence of risk aversion. In…
Measuring the contribution of a bank or an insurance company to overall systemic risk is a key concern, particularly in the aftermath of the 2007--2009 financial crisis and the 2020 downturn. In this paper, we derive worst-case and…
The risk of a credit portfolio depends crucially on correlations between the probability of default (PD) in different economic sectors. Often, PD correlations have to be estimated from relatively short time series of default rates, and the…
Dynamical systems can be prone to severe fluctuations due to the presence of chaotic dynamics. This paper explains for a toy chaotic economic model how such a system can be regulated by the application of relatively weak control to keep the…