Related papers: Banking risk as an epidemiological model: an optim…
Nowadays, epidemic models provide an appropriate tool for describing the propagation of biological viruses in human or animal populations, or rumours and other kinds of information in social networks and malware in both computer and ad hoc…
This paper studies a systemic risk control problem by the central bank, which dynamically plans monetary supply to stabilize the interbank system with borrowing and lending activities. Facing both heterogeneity among banks and the common…
The optimal control of epidemic-like stochastic processes is important both historically and for emerging applications today, where it can be especially important to include time-varying parameters that impact viral epidemic-like…
The negative externalities from an individual bank failure to the whole system can be huge. One of the key purposes of bank regulation is to internalize the social costs of potential bank failures via capital charges. This study proposes a…
We consider the problem of governing systemic risk in a banking system model. The banking system model consists in an initial value problem for a system of stochastic differential equations whose dependent variables are the log-monetary…
This paper develops a continuous functional framework for analyzing contagion dynamics in financial networks, extending the Navier-Stokes-based approach to network-structured spatial processes. We model financial distress propagation as a…
The interbank market is considered one of the most important channels of contagion. Its network representation, where banks and claims/obligations are represented by nodes and links (respectively), has received a lot of attention in the…
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…
Infectious diseases are caused by pathogenic microorganisms and can spread through different ways. Mathematical models and computational simulation have been used extensively to investigate the transmission and spread of infectious…
We study the impact of model parameter uncertainty on optimally mitigating the spread of epidemics. We capture the epidemic spreading process using a susceptible-infected-removed (SIR) epidemic model and consider testing for isolation as…
In this study, we present a new epidemiological model, with contamination from confirmed and unreported. We also compute equilibria and study their stability without intervention strategies. Optimal control theory has proven to be a…
Micro-structural models of contagion and systemic risk emphasize that shock propagation is inherently multi-channel, spanning counterparty exposures, short-term funding and roll-over risk, securities cross-holdings, and common-asset…
The Bass diffusion equation is a well-known and established modeling approach for describing new product adoption in a competitive market. This model also describes diffusion phenomena in various contexts: infectious disease spread modeling…
Interbank deposits (loans and credits) are quite common in banking system all over the world. Such interbank co-operation is profitable for banks but it can also lead to collective financial failures. In this paper we introduce a new model…
The importance of adequately modeling credit risk has once again been highlighted in the recent financial crisis. Defaults tend to cluster around times of economic stress due to poor macro-economic conditions, {\em but also} by directly…
In this paper, we take up the analysis of a principal/agent model with moral hazard introduced in [17], with optimal contracting between competitive investors and an impatient bank monitoring a pool of long-term loans subject to Markovian…
In this paper, we address a social planner's optimal control problem for a partially observable stochastic epidemic model. The control measures include social distancing, testing, and vaccination. Using a diffusion approximation for the…
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…
We present a control framework for stochastic compartmental models in epidemiology. In this framework, rather than directly controlling the stochastic system, we perform optimal control of an associated Fokker-Planck equation, with the goal…
Credit and liquidity risks represent main channels of financial contagion for interbank lending markets. On one hand, banks face potential losses whenever their counterparties are under distress and thus unable to fulfill their obligations.…