Related papers: Libor at crossroads: stochastic switching detectio…
Money launderers exploit the weaknesses in detection systems by purposefully placing their ill-gotten money into multiple accounts, at different banks. That money is then layered and moved around among mule accounts to obscure the origin…
During a financial crisis, the capital markets network frequently exhibits a high correlation between returns. We developed a network analysis framework based on daily returns from 42 countries to determine systemic stability. Our network…
Sudden transitions in the state of a system are often undesirable in natural and human-made systems. Such transitions under fast variation of system parameters are called rate-induced tipping. We experimentally demonstrate rate-induced…
Like natural complex systems such as the Earth's climate or a living cell, semiconductor lithography systems are characterized by nonlinear dynamics across more than a dozen orders of magnitude in space and time. Thousands of sensors…
This work proposes an augmented variant of DebtRank with uncertainty intervals as a method to investigate and assess systemic risk in financial networks, in a context of incomplete data. The algorithm is tested against a default contagion…
The knowledge of transitions between regular, laminar or chaotic behavior is essential to understand the underlying mechanisms behind complex systems. While several linear approaches are often insufficient to describe such processes, there…
The LIBOR market model is very popular for pricing interest rate derivatives, but is known to have several pitfalls. In addition, if the model is driven by a jump process, then the complexity of the drift term is growing exponentially fast…
Financial news is essential for accurate market prediction, but evolving narratives across macroeconomic regimes introduce semantic and causal drift that weaken model reliability. We present an evaluation framework to quantify robustness in…
An empirical analysis on Eurodollar interest rates daily data in the time period 1990-1996, is performed and compared with Libor data in the time period 1984-1998. The complementary cumulative distributions for the daily fluctuations at…
One 'problem' with the 21st century world, particularly the economic and business worlds, is the phenomenal and increasing number of interconnections between economic agents (consumers, firms, banks, markets, national economies). This…
The growing instability of both global and domestic economic environments has increased the risk of financial distress at the household level. However, traditional econometric models often rely on delayed and aggregated data, limiting their…
The aim of this work is to provide fast and accurate approximation schemes for the Monte Carlo pricing of derivatives in LIBOR market models. Standard methods can be applied to solve the stochastic differential equations of the successive…
We study caplet stripping, the problem of recovering a caplet volatility term structure consistent with quoted cap volatilities. Many academic papers on the Libor market model assume caplet volatilities are readily available, whereas…
Financial markets of emerging economies are vulnerable to extreme and cascading information spillovers, surges, sudden stops and reversals. With this in mind, we develop a new online early warning system (EWS) to detect what is referred to…
In Maslov (2003), a two level model of the occurrence of financial pyramid (bubbles) has been considered. We also considered the mathematical analogy of this model to Bose condensation. In the present paper, we explain why Ponzi schemes and…
Financial contagion from liquidity shocks has being recently ascribed as a prominent driver of systemic risk in interbank lending markets. Building on standard compartment models used in epidemics, in this work we develop an EDB…
Measuring systemic risk or fragility of financial systems is a ubiquitous task of fundamental importance in analyzing market efficiency, portfolio allocation, and containment of financial contagions. Recent attempts have shown that…
Cross-border equity and long-term debt securities portfolio investment networks are analysed from 2002 to 2012, covering the 2008 global financial crisis. They serve as network-proxies for measuring the robustness of the global financial…
This paper introduces a new framework to quantify distance between finite sets with uncertainty present, where probability distributions determine the locations of individual elements. Combining this with a Bayesian change point detection…
Modelling financial time series as a time change of a simpler process has been proposed in various forms over the years. One of such recent approaches is called volatility homogenisation decomposition, and has been designed specifically to…