Related papers: Structural default model with mutual obligations

We consider two bivariate models with two-way interactions in context of risk and queueing theory. The two entities interact with each other by providing assistance but otherwise evolve independently. We focus on certain random quantities…

Functional decomposition of logic circuits has profound influence on all quality aspects of the cost-effective implementation of modern digital systems. In this paper, a relational approach to the decomposition of logic circuits is…

We analyse time series of CDS spreads for a set of major US and European institutions on a pe- riod overlapping the recent financial crisis. We extend the existing methodology of {\epsilon}-drawdowns to the one of joint {\epsilon}-drawups,…

We build a general model for pricing defaultable claims. In addition to the usual absence of arbitrage assumption, we assume that one defaultable asset (at least) looses value when the default occurs. We prove that under this assumption, in…

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…

We investigate under which conditions a single simulation of joint default times at a final time horizon can be decomposed into a set of simulations of joint defaults on subsequent adjacent sub-periods leading to that final horizon. Besides…

The existence of asymmetric information has always been a major concern for financial institutions. Financial intermediaries such as commercial banks need to study the quality of potential borrowers in order to make their decision on…

This study investigates the functioning of modern payment systems through the lens of banks' maturity mismatch practices, and it examines the effects of banks' refusal to roll over short-term interbank liabilities on financial stability.…

We consider the problem of governing systemic risk in an assets-liabilities dynamical model of banking system. In the model considered each bank is represented by its assets and its liabilities.The capital reserves of a bank are the…

Log-linear models are a classical tool for the analysis of contingency tables. In particular, the subclass of graphical log-linear models provides a general framework for modelling conditional independences. However, with the exception of…

This paper studies the valuation of a class of default swaps with the embedded option to switch to a different premium and notional principal anytime prior to a credit event. These are early exercisable contracts that give the protection…

Conventional models of matching markets assume that monetary transfers can clear markets by compensating for utility differentials. However, empirical patterns show that such transfers often fail to close structural preference gaps. This…

We propose a new structural model that can compute the electricity spot and forward prices in two coupled markets with limited interconnection and multiple fuels. We choose a structural approach in order to represent some key…

Models which postulate lognormal dynamics for interest rates which are compounded according to market conventions, such as forward LIBOR or forward swap rates, can be constructed initially in a discrete tenor framework. Interpolating…

We investigate the macroeconomic consequences of narrow banking in the context of stock-flow consistent models. We begin with an extension of the Goodwin-Keen model incorporating time deposits, government bills, cash, and central bank…

Interbank lending and borrowing occur when financial institutions seek to settle and refinance their mutual positions over time and circumstances. This interactive process involves money creation at the aggregate level. Coordination…

The valuation of counterparty risk for single name credit derivatives requires the computa- tion of joint distributions of default times of two default-prone entities. For a Merton-type model, we derive some formulas for these joint…

Brownian motion in one or more dimensions is extensively used as a stochastic process to model natural and engineering signals, as well as financial data. Most works dealing with multidimensional Brownian motion consider the different…

In this paper we consider some generalizations of the classical d-dimensional Brownian risk model. This contribution derives some non-asymptotic bounds for simultaneous ruin probabilities of interest. In addition, we obtain non-asymptotic…

Traditional economic models typically treat private information, or signals, as generated from some underlying state. Recent work has explicated alternative models, where signals correspond to interpretations of available information. We…