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Wildfires pose an increasing threat to the safety and reliability of power systems, particularly in distribution networks located in fire-prone regions. To mitigate ignition risk from electrical infrastructure, utilities often employ safety…
We consider the problem of governing systemic risk in a banking system model. The banking system model consists in an initial value problem for a system of stochastic differential equations whose dependent variables are the log-monetary…
This paper is devoted to study the optimal portfolio problem. Harry Markowitz's Ph.D. thesis prepared the ground for the mathematical theory of finance. In modern portfolio theory, we typically find asset returns that are modeled by a…
When the available statistical information is imperfect, it is dangerous to follow standard optimisation procedures to construct an optimal portfolio, which usually leads to a strong concentration of the weights on very few assets. We…
We consider a network of banks that optimally choose a strategy of asset liquidations and borrowing in order to cover short term obligations. The borrowing is done in the form of collateralized repurchase agreements, the haircut level of…
This paper provides a general framework for modeling financial contagion in a system with obligations in multiple illiquid assets (e.g., currencies). In so doing, we develop a multi-layered financial network that extends the single network…
We develop a novel stress-test framework to monitor systemic risk in financial systems. The modular structure of the framework allows to accommodate for a variety of shock scenarios, methods to estimate interbank exposures and mechanisms of…
Reconstructing patterns of interconnections from partial information is one of the most important issues in the statistical physics of complex networks. A paramount example is provided by financial networks. In fact, the spreading and…
A well-interpretable measure of information has been recently proposed based on a partition obtained by intersecting a random sequence with its moving average. The partition yields disjoint sets of the sequence, which are then ranked…
According to the definition of the London Interbank Offered Rate (LIBOR), contributing banks should give fair estimates of their own borrowing costs in the interbank market. Between 2007 and 2009, several banks made inappropriate…
In general insurance companies, a correct estimation of liabilities plays a key role due to its impact on management and investing decisions. Since the Financial Crisis of 2007-2008 and the strengthening of regulation, the focus is not only…
Entropy based ideas find wide-ranging applications in finance for calibrating models of portfolio risk as well as options pricing. The abstracted problem, extensively studied in the literature, corresponds to finding a probability measure…
The demand for resilient logistics networks has increased because of recent disasters. When we consider optimization problems, entropy regularization is a powerful tool for the diversification of a solution. In this study, we proposed a…
We propose a computational framework to quantify (measure) and to optimize the reliability of complex systems. The approach uses a graph representation of the system that is subject to random failures of its components (nodes and edges).…
Systemic risk measures aggregate the risks from multiple financial institutions to find system-wide capital requirements. Though much attention has been given to assessing the level of systemic risk, less has been given to allocating that…
It is of growing concern to ensure the resilience in electricity infrastructure systems to extreme weather events with the help of appropriate hardening measures and new operational procedures. An effective mitigation strategy requires a…
The policy objective of safeguarding financial stability has stimulated a wave of research on systemic risk analytics, yet it still faces challenges in measurability. This paper models systemic risk by tapping into expert knowledge of…
In order to properly manage risk, practitioners must understand the aggregate risks they are exposed to. Additionally, to properly price policies and calculate bonuses the relative riskiness of individual business units must be well…
It is well-known that disciplines such as mechanical engineering, electrical engineering, civil engineering, aerospace engineering, chemical engineering and software engineering witnessed successful applications of reliability engineering…
In this paper, we introduce an impact centrality measure to evaluate shock propagation on financial networks capturing a notion of contagion and systemic risk contributions, permitting comparisons of these risks over time. In addition, we…