Related papers: A systemic shock model for too big to fail financi…
A microscopic dynamic model is here constructed and analyzed, describing the evolution of the income distribution in the presence of taxation and redistribution in a society in which also tax evasion and auditing processes occur. The focus…
In this paper, we employ Credit Default Swaps (CDS) to model the joint and conditional distress probabilities of banks in Europe and the U.S. using factor copulas. We propose multi-factor, structured factor, and factor-vine models where the…
A general theory is developed to study individual based models which are discrete in time. We begin by constructing a Markov chain model that converges to a one-dimensional map in the infinite population limit. Stochastic fluctuations are…
Equity default-swaps pay the holder a fixed amount of money when the underlying spot level touches a (far-down) barrier during the life of the instrument. While most pricing models give reasonable results when the barrier lies within the…
We revisit a simple dynamical model of rupture in random media with long-range elasticity to test whether rupture can be seen as a first-order or a critical transition. We find a clear scaling of the macroscopic modulus as a function of…
The Kuramoto-Sivashinsky equation with fixed boundary conditions is numerically studied. Shocklike structures appear in the time-averaged patterns for some parameter range of the boundary values. Effective diffusion constant is estimated…
The influence model is a discrete-time stochastic model that succinctly captures the interactions of a network of Markov chains. The model produces a reduced-order representation of the stochastic network, and can be used to describe and…
The possible paralelism existing between phase transitions and fracture in disordered materials, is discussed using the well-known Fiber Bundle Models and a probabilistic approach suited to smooth fluctuations near the critical point. Two…
Stochastic comparisons of series and parallel systems are important in many areas of engineering, operations research and reliability analysis. These comparisons allow for the evaluation of the performance and reliability of systems under…
We contribute to the understanding of how systemic risk arises in a network of credit-interlinked agents. Motivated by empirical studies we formulate a network model which, despite its simplicity, depicts the nature of interbank markets…
This paper considers general term structure models like the ones appearing in portfolio credit risk modelling or life insurance. We give a general model starting from families of forward rates driven by infinitely many Brownian motions and…
We analyze the hitting time distributions of stock price returns in different time windows, characterized by different levels of noise present in the market. The study has been performed on two sets of data from US markets. The first one is…
This chapter first presents a rather personal view of some different aspects of predictability, going in crescendo from simple linear systems to high-dimensional nonlinear systems with stochastic forcing, which exhibit emergent properties…
The dynamics of generalized Lotka-Volterra systems is studied by theoretical techniques and computer simulations. These systems describe the time evolution of the wealth distribution of individuals in a society, as well as of the market…
This paper investigates how economic shocks propagate and amplify through the input-output network connecting industrial sectors in developed economies. We study alternative models of diffusion on networks and we calibrate them using…
A probabilistic method for solving time-dependent load-transfer models of fracture is developed. It is applicable to any rule of load redistribution, i.e, local, hierarchical, etc. In the new method, the fluctuations are generated during…
Inflation exhibits state-dependent, skewed, and fat-tailed dynamics that make risk a central concern for monetary policy. Accordingly, inflation risks are distributional and cannot be fully captured by mean-based models. We propose a…
We study optimal proportional reinsurance and investment strategies for an insurance company which experiences both ordinary and catastrophic claims and wishes to maximize the expected exponential utility of its terminal wealth. We propose…
The question we address here is of whether phenomena of collective bankruptcies are related to self-organized criticality. In order to answer it we propose a simple model of banking networks based on the random directed percolation. We…
To describe the nonequilibrium states of a system we introduce a new thermodynamic parameter - the lifetime of a system. The statistical distributions which can be obtained out of the mesoscopic description characterizing the behaviour of a…