Related papers: Unexpected Default in an Information Based Model
We study the stability of deterministic systems given sequences of large, jump-like perturbations. Our main result is to dervie a lower bound for the probability of the system to remain in the basin, given that perturbations are rare…
In this paper we give a financial justification, based on non arbitrage conditions, of the $(H)$ hypothesis in default time modelling. We also show how the $(H)$ hypothesis is affected by an equivalent change of probability measure. The…
We illustrate a class of conditional models for the analysis of longitudinal data suffering attrition in random effects models framework, where the subject-specific random effects are assumed to be discrete and to follow a time-dependent…
The transient fluctuation of the prosperity of firms in a network economy is investigated with an abstract stochastic model. The model describes the profit which firms make when they sell materials to a firm which produces a product and the…
An efficient conditioning technique, the so-called Brownian Bridge simulation, has previously been applied to eliminate pricing bias that arises in applications of the standard discrete-time Monte Carlo method to evaluate options written on…
Time delays pose an important challenge in networked control systems, which are now ubiquitous. Focusing on switched systems, we introduce a framework that provides an upper bound for errors caused by switching delays. Our framework is…
We study the optimal stopping of an American call option in a random time-horizon under exponential spectrally negative L\'evy models. The random time-horizon is modeled as the so-called Omega default clock in insurance, which is the first…
Firms that price perishable resources -- airline seats, hotel rooms, seasonal inventory -- now routinely use demand predictions, but these predictions vary widely in quality. Under hard capacity constraints, acting on an inaccurate…
We study the problem of minimising the connection time between non-equilibrium steady states of the Brownian Gyrator. This is a paradigmatic model in non-equilibrium statistical mechanics, an overdamped Brownian particle trapped in a…
In Markov networks, measurement blackouts with unknown frequency compromise observations such that thermodynamic quantities can no longer be inferred reliably. In particular, the observed currents neither discern equilibrium from…
Let t be the first-passage time of a continuous barrier by a c{\`a}dl{\`a}g adapted process. We show that t admits a canonical fourfold pathwise decomposition into continuous contact, contact from the left followed by an upward jump, exact…
The aim of this paper is to quantify and manage systemic risk caused by default contagion in the interbank market. We model the market as a random directed network, where the vertices represent financial institutions and the weighted edges…
We develop an input delay-compensating feedback law for linear switched systems with time-dependent switching. Because the future values of the switching signal, which are needed for constructing an exact predictor-feedback law, may be…
A method for estimating theoretical predictability of time series is presented, based on information-theoretic functionals---redundancies and surrogate data technique. The redundancy, designed for a chosen model and a prediction horizon,…
Conformal prediction is a popular method to construct prediction intervals with marginal coverage guarantees from black-box machine learning models. In applications with potentially high-impact events, such as flooding or financial crises,…
In this article, we consider a continuous review (s, S) inventory system with failures of demand fulfillment (service) modeled as a Markov-modulated retrial queueing system. The inventory system features a single product that experiences…
We consider financial networks, where banks are connected by contracts such as debts or credit default swaps. We study the clearing problem in these systems: we want to know which banks end up in a default, and what portion of their…
A new framework for asset price dynamics is introduced in which the concept of noisy information about future cash flows is used to derive the price processes. In this framework an asset is defined by its cash-flow structure. Each cash flow…
This paper develops a structural credit risk model to characterize the difference between the economic and recorded default times for a firm. Recorded default occurs when default is recorded in the legal system. The economic default time is…
We discuss the parameter estimation of the probability of default (PD), the correlation between the obligors, and a phase transition. In our previous work, we studied the problem using the beta-binomial distribution. A non-equilibrium phase…