Related papers: Assessing systemic risk due to fire sales spillove…
We study the optimal excess-of-loss reinsurance problem when both the intensity of the claims arrival process and the claim size distribution are influenced by an exogenous stochastic factor. We assume that the insurer's surplus is governed…
This paper studies an optimal investment and risk control problem for an insurer with default contagion and regime-switching. The insurer in our model allocates his/her wealth across multi-name defaultable stocks and a riskless bond under…
Supply chain disruptions constitute an often underestimated risk for financial stability. As in financial networks, systemic risks in production networks arises when the local failure of one firm impacts the production of others and might…
The maximum entropy principle can be used to assign utility values when only partial information is available about the decision maker's preferences. In order to obtain such utility values it is necessary to establish an analogy between…
In this article, we address the problem of risk assessment of stealthy attacks on uncertain control systems. Considering data injection attacks that aim at maximizing impact while remaining undetected, we use the recently proposed…
Risk-sensitive planning aims to identify policies maximizing some tail-focused metrics in Markov Decision Processes (MDPs). Such an optimization task can be very costly for the most widely used and interpretable metrics such as threshold…
We derive the default cascade model and the fire-sale spillover model in a unified interdependent framework. The interactions among banks include not only direct cross-holding, but also indirect dependency by holding mutual assets outside…
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…
In our previous paper, "A Unified Approach to Systemic Risk Measures via Acceptance Set" (\textit{Mathematical Finance, 2018}), we have introduced a general class of systemic risk measures that allow for random allocations to individual…
In the past years statistical physics has been successfully applied for complex networks modelling. In particular, it has been shown that the maximum entropy principle can be exploited in order to construct graph ensembles for real-world…
The fragility of financial systems was starkly demonstrated in early 2023 through a cascade of major bank failures in the United States, including the second, third, and fourth largest collapses in the US history. The highly interdependent…
A novel procedure is presented for the objective comparison and evaluation of a bank's decision rules in optimising the timing of loan recovery. This procedure is based on finding a delinquency threshold at which the financial loss of a…
The principle of maximum entropy is a broadly applicable technique for computing a distribution with the least amount of information possible constrained to match empirical data, for instance, feature expectations. We seek to generalize…
Systematic investment strategies are exposed to a subtle but pervasive vulnerability: the progressive erosion of their effectiveness as market regimes change. Traditional risk measures, designed to capture volatility or drawdowns, overlook…
Recent crises have shown that the knowledge of the structure of input-output networks at the firm level is crucial when studying economic resilience from the microscopic point of view of firms that rewire their connections under supply and…
Based on a point of view that solvency and security are first, this paper considers regular-singular stochastic optimal control problem of a large insurance company facing positive transaction cost asked by reinsurer under solvency…
We study the mean field approximation of a recent model of cascades on networks relevant to the investigation of systemic risk control in financial networks. In the model, the hypothesis of a trend reinforcement in the stochastic process…
Trading activities in financial systems create various channels through which systemic risk can propagate. An important contagion channel is financial fire sales, where a bank failure causes asset prices to fall due to asset liquidation,…
Analytical, free of time consuming Monte Carlo simulations, framework for credit portfolio systematic risk metrics calculations is presented. Techniques are described that allow calculation of portfolio-level systematic risk measures…
We address the problem of maintaining high voltage power transmission networks in security at all time, namely anticipating exceeding of thermal limit for eventual single line disconnection (whatever its cause may be) by running slow, but…