Related papers: LIBOR troubles: anomalous movements detection base…
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.…
In this research, we have empirically investigated the key drivers affecting liquidity in equity markets. We illustrated how theoretical models, such as Kyle's model, of agents' interplay in the financial markets, are aligned with the…
We develop a new market-making model, from the ground up, which is tailored towards high-frequency trading under a limit order book (LOB), based on the well-known classification of order types in market microstructure. Our flexible…
A novel network-based approach is introduced to analyze banking systems, focusing on two main themes: identifying influential nodes within global banking networks using Bank for International Settlements data and developing an algorithm to…
Many countries impose regulatory restrictions on lending rates known as interest rate caps. In most cases, these restrictions apply to the effective (rather than nominal) interest rate, a measure which incorporates all commissions and fees…
Recommendations based on behavioral data may be faced with ambiguous statistical evidence. We consider the case of association rules, relevant e.g.~for query and product recommendations. For example: Suppose that a customer belongs to…
In this paper we aim to find a measure for the diversity of cash flows between agents in an economy. We argue that cash flows can be linked to probabilities of finding a currency unit in a given cash flow. We then use the information…
Relationship lending is broadly interpreted as a strong partnership between a lender and a borrower. Nevertheless, we still lack consensus regarding how to quantify the strength of a lending relationship, while simple statistics such as the…
We develop a multi-factor stochastic volatility Libor model with displacement, where each individual forward Libor is driven by its own square-root stochastic volatility process. The main advantage of this approach is that, maturity-wise,…
We investigate entropy as a financial risk measure. Entropy explains the equity premium of securities and portfolios in a simpler way and, at the same time, with higher explanatory power than the beta parameter of the capital asset pricing…
A limit order book provides information on available limit order prices and their volumes. Based on these quantities, we give an empirical result on the relationship between the bid-ask liquidity balance and trade sign and we show that…
We follow the lines of Musiela and Rutkowski and extend their interpolation method to models with jumps. Together with an extension method for the tenor structure of a given LIBOR market model (LMM) we get an infinite LIBOR termstructure.…
We propose a framework for studying optimal market making policies in a limit order book (LOB). The bid-ask spread of the LOB is modelled by a Markov chain with finite values, multiple of the tick size, and subordinated by the Poisson…
In the late 90's, after severe financial and economic crisis, accompanied by inflation and exchange rate instability, Eastern Europe emerged into two groups of countries with radically contrasting monetary regimes (Currency Boards and…
Algorithmic lending has transformed the consumer credit landscape, with complex machine learning models now commonly used to make or assist underwriting decisions. To comply with fair lending laws, these algorithms typically exclude legally…
Maximum Entropy is a powerful concept that entails a sharp separation between relevant and irrelevant variables. It is typically invoked in inference, once an assumption is made on what the relevant variables are, in order to estimate a…
Specially customised Entropies are widely applied in measuring the degree of uncertainties existing in the frame of discernment. However, all of these entropies regard the frame as a whole that has already been determined which dose not…
In this paper we estimate the propagation of liquidity shocks through interbank markets when the information about the underlying credit network is incomplete. We show that techniques such as Maximum Entropy currently used to reconstruct…
With the proliferation of algorithmic high-frequency trading in financial markets, the Limit Order Book has generated increased research interest. Research is still at an early stage and there is much we do not understand about the dynamics…
We examine optimal regulation of financial networks with debt interdependencies between financial firms. We first show that firms often have an incentive to choose excessively risky portfolios and overly correlate their portfolios with…