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Dynamic processes on networks are fundamental to understanding modern-day phenomena such as information diffusion and opinion polarization on the internet or epidemics spreading through society. However, such processes are notoriously…
The networked nature of supply chains makes them susceptible to systemic risk, where local firm failures can propagate through firm interdependencies that can lead to cascading supply chain disruptions. The systemic risk of supply chains…
Systemic risk is a rapidly developing area of research. Classical financial models often do not adequately reflect the phenomena of bubbles, crises, and transitions between them during credit cycles. To study very improbable events,…
A simple quantitative example of a reflexive feedback process and the resulting price dynamics after an exogenous price shock to a financial network is presented. Furthermore, an outline of a theory that connects financial reflexivity,…
We study the problem of asset liquidation in financial systems. During financial crises, asset liquidation is often inevitable but can lead to substantial losses if a significant amount of illiquid assets are sold simultaneously at…
We analyze the systemic risk for disjoint and overlapping groups (e.g., central clearing counterparties (CCP)) by proposing new models with realistic game features. Specifically, we generalize the systemic risk measure proposed in [F.…
Credit risk prediction is an effective way of evaluating whether a potential borrower will repay a loan, particularly in peer-to-peer lending where class imbalance problems are prevalent. However, few credit risk prediction models for…
This paper considers the portfolio management problem of optimal investment, consumption and life insurance. We are concerned with time inconsistency of optimal strategies. Natural assumptions, like different discount rates for consumption…
In this paper, we consider the problem of quantifying systemic redundancy in reliable systems having multiple controllers with overlapping functionality. In particular, we consider a multi-channel system with multi-controller configurations…
This paper explores the estimation of a panel data model with cross-sectional interaction that is flexible both in its approach to specifying the network of connections between cross-sectional units, and in controlling for unobserved…
Within the framework of maximum entropy principle we show that the finite-size long-range Ising model is the adequate model for the description of homogeneous credit portfolios and the computation of credit risk when default correlations…
The global financial system can be represented as a large complex network in which banks, hedge funds and other financial institutions are interconnected to each other through visible and invisible financial linkages. Recently, a lot of…
We aim to analyze the behaviour of a finite-time stochastic system, whose model is not available, in the context of more rare and harmful outcomes. Standard estimators are not effective in making predictions about such outcomes due to their…
This paper firstly addresses the problem of risk assessment under false data injection attacks on uncertain control systems. We consider an adversary with complete system knowledge, injecting stealthy false data into an uncertain control…
The process of contagiousness spread modelling is well-known in epidemiology. However, the application of spread modelling to banking market is quite recent. In this work, we present a system of ordinary differential equations, simulating…
Natural and social multivariate systems are commonly studied through sets of simultaneous and time-spaced measurements of the observables that drive their dynamics, i.e., through sets of time series. Typically, this is done via hypothesis…
This paper presents a dynamic game framework to analyze the role of large banks in interbank markets. By extending existing models, we incorporate a large bank as a dynamic decision-maker interacting with multiple small banks. Using the…
To quantify an operational risk capital charge under Basel II, many banks adopt a Loss Distribution Approach. Under this approach, quantification of the frequency and severity distributions of operational risk involves the bank's internal…
Electricity systems are experiencing increased effects of randomness and variability due to emerging stochastic assets. The increased effects introduce new uncertainties into power systems that can impact system operability and reliability.…
We propose to interpret distribution model risk as sensitivity of expected loss to changes in the risk factor distribution, and to measure the distribution model risk of a portfolio by the maximum expected loss over a set of plausible…