Related papers: A systemic shock model for too big to fail financi…
We introduce a new diffusion process Xt to describe asset prices within an economic bubble cycle. The main feature of the process, which differs from existing models, is the drift term where a mean-reversion is taken based on an exponential…
Evaluation of systemic risk in networks of financial institutions in general requires information of inter-institution financial exposures. In the framework of Debt Rank algorithm, we introduce an approximate method of systemic risk…
This paper proposes an empirical test of financial contagion in European equity markets during the tumultuous period of 2008-2011. Our analysis shows that traditional GARCH and Gaussian stochastic-volatility models are unable to explain two…
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…
We introduce a collective model for life insurance where the heterogeneity of each insured, including the health state, is modeled by a diffusion process. This model is influenced by concepts in statistical mechanics. Using the proposed…
Dynamical systems with components whose sizes evolve according to multiplicative stochastic rules have been recently combined with entry and exit processes. We show that the assumptions usually made in modeling exits are at odds with the…
To identify emerging interdependencies between traded stocks we investigate the behavior of the stocks of FTSE 100 companies in the period 2000-2015, by looking at daily stock values. Exploiting the power of information theoretical measures…
Excitable media can develop spiral chaos, in which the number of spirals changes chaotically with time. Depending on parameter values in dynamical equations, spiral chaos may permanently persist or spontaneously arrive at a steady state…
This review is a partial synthesis of the book ``Why stock market crash'' (Princeton University Press, January 2003), which presents a general theory of financial crashes and of stock market instabilities that his co-workers and the author…
The occurrence of aftershocks following a major financial crash manifests the critical dynamical response of financial markets. Aftershocks put additional stress on markets, with conceivable dramatic consequences. Such a phenomenon has been…
Using particle system methodologies we study the propagation of financial distress in a network of firms facing credit risk. We investigate the phenomenon of a credit crisis and quantify the losses that a bank may suffer in a large credit…
We study the arrival time distribution of overdamped particles driven by a constant force in a piecewise linear random potential which generates the dichotomous random force. Our approach is based on the path integral representation of the…
We show that, provided one focuses on properly selected episodes, one can apply to the social sciences the same observational strategy that has proved successful in natural sciences such as astrophysics or geodynamics. For instance, in…
For a coherent system the Barlow-Proschan importance index, defined when the component lifetimes are independent, measures the probability that the failure of a given component causes the system to fail. Iyer (1992) extended this concept to…
We introduce a framework for analyzing ordinary differential equation (ODE) models of biological networks using statistical model checking (SMC). A key aspect of our work is the modeling of single-cell variability by assigning a probability…
We consider a banking network represented by a system of stochastic differential equations coupled by their drift. We assume a core-periphery structure, and that the banks in the core hold a bubbly asset. The banks in the periphery have not…
For centuries, national economies created wealth by engaging in international trade and production. The resulting international supply networks not only increase wealth for countries, but also create systemic risk: economic shocks,…
We present a class of stochastic processes in which the large deviation functions of time-integrated observables exhibit singularities that relate to dynamical phase transitions of trajectories. These illustrative examples include Brownian…
Systemic financial risk refers to the simultaneous failure or destabilization of multiple financial institutions, often triggered by contagion mechanisms or common exposures to shocks. In this paper, we present a dynamical model of bank…
The global financial system has become highly connected and complex. Has been proven in practice that existing models, measures and reports of financial risk fail to capture some important systemic dimensions. Only lately, advisory boards…