Related papers: Compressing Over-the-Counter Markets
We present a novel agent-based approach to simulating an over-the-counter (OTC) financial market in which trades are intermediated solely by market makers and agent visibility is constrained to a network topology. Dynamics, such as changes…
We introduce pricing formulas for competition and collusion models of two-sided markets with an outside option. For the competition model, we find conditions under which prices and consumer surplus may increase or decrease if the outside…
Since 2008, the network analysis of financial systems is one of the most important subjects in economics. In this paper, we have used the complexity approach and Random Matrix Theory (RMT) for analyzing the global banking network. By…
We propose a model for the credit and liquidity risks faced by clearing members of Central Counterparty Clearing houses (CCPs). This model aims to capture the features of: gap risk; feedback between clearing member default, market…
To the best of our knowledge, this paper proposes for the first time a design of a continuous local flexibility market that explicitly considers network constraints. Continuous markets are expected to be the most appropriate design option…
We propose a new model of the liquidity driven banking system focusing on overnight interbank loans. This significant branch of the interbank market is commonly neglected in the banking system modeling and systemic risk analysis. We…
In a financial exchange, market impact is a measure of the price change of an asset following a transaction. This is an important element of market microstructure, which determines the behaviour of the market following a trade. In this…
Global financial systems are undergoing strategic shifts as geopolitical tensions reshape international trade and payments. The United States (US)-China trade war, sanctions regimes, and rising concerns over the weaponization of financial…
Common asset holdings are widely believed to have been the primary vector of contagion in the recent financial crisis. We develop a network approach to the amplification of financial contagion due to the combination of overlapping…
Countries participate in global value chains by engaging in backward and forward transactions connecting multiple geographically dispersed production stages. Inspired by network theory, we model global trade as a multilayer network and…
The increasingly complex economic and financial environment in which we live makes the management of liquidity in payment systems and the economy in general a persistent challenge. New technologies are making it possible to address this…
Economic interdependencies have become increasingly present in globalized production, financial and trade systems. While establishing interdependencies among economic agents is crucial for the production of complex products, they may also…
We show that filling an order with a large number of distinct counterparts incurs additional market impact, as opposed to filling the order with a small number of counterparts. For best execution, therefore, it may be beneficial to…
A repo trade involves the sale of a security coupled with a contract to repurchase at a later time. Following the 2008 financial crisis, accounting standards were updated to require repo intermediaries, who are mostly banks, to increase…
This paper introduces a formulation of the optimal network compression problem for financial systems. This general formulation is presented for different levels of network compression or rerouting allowed from the initial interbank network.…
Counterparty risk denotes the risk that a party defaults in a bilateral contract. This risk not only depends on the two parties involved, but also on the risk from various other contracts each of these parties holds. In rather informal…
Management of systemic risk in financial markets is traditionally associated with setting (higher) capital requirements for market participants. There are indications that while equity ratios have been increased massively since the…
There is an intrinsic value in higher integration of multi-carrier energy systems (especially gas and electricity), to increase operational flexibility in the electricity system and to improve allocation of resources in gas and electricity…
Localized shocks arising from climate extremes, geopolitical conflicts, and trade protectionism cascade through trade networks, triggering global food crises. Cross-product substitution, a critical response strategy, induces cross-product…
Sequential fundraising in two sided online platforms enable peer to peer lending by sequentially bringing potential contributors, each of whose decisions impact other contributors in the market. However, understanding the dynamics of…