Related papers: Modeling Financial System with Interbank Flows, Bo…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…
We consider a mean-field model for large banking systems, which takes into account default and recovery of the institutions. Building on models used for groups of interacting neurons, we first study a McKean-Vlasov dynamics and its…
We extend in a minimal way the stylized model introduced in in "Tipping Points in Macroeconomic Agent Based Models" [JEDC 50, 29-61 (2015)], with the aim of investigating the role and efficacy of monetary policy of a `Central Bank' that…
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…
In this paper we consider a mean-field model of interacting diffusions for the monetary reserves in which the reserves are subjected to a self- and cross-exciting shock. This is motivated by the financial acceleration and fire sales…
The real monetary economy is grounded upon monetary flow equilibration or the activity of actualizing monetary flow continuity at each economic agent except for the central bank. Every update of monetary flow continuity at each agent…
An interbank market lets participants pool the risk arising from the combination of illiquid investments and random withdrawals by depositors. But it also creates the potential for one bank's failure to trigger off avalanches of further…
Assessing the stability of economic systems is a fundamental research focus in economics, that has become increasingly interdisciplinary in the currently troubled economic situation. In particular, much attention has been devoted to the…
When a loan is approved for a person or company, the bank is subject to \emph{credit risk}; the risk that the lender defaults. To mitigate this risk, a bank will require some form of \emph{security}, which will be collected if the lender…
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…
Systemic liquidity risk, defined by the IMF as "the risk of simultaneous liquidity difficulties at multiple financial institutions", is a key topic in macroprudential policy and financial stress analysis. Specialized models to simulate…
This paper introduces a heterogeneous macroeconomic model of a Proof-of-Stake (PoS) network to analyze the long-term centralizing effects of external traditional finance (TradFi) yields. We model a continuum of rational actors divided into…
In a series of precedent papers, we have presented a comprehensive methodology, termed Field Economics, for translating a standard economic model into a statistical field-formalism framework. This formalism requires a large number of…
We analyze cascades of defaults in an interbank loan market. The novel feature of this study is that the network structure and the size distribution of banks are derived from empirical data. We find that the ability of a defaulted…
In this paper, we analyze the effect of a policy recommendation on the performance of an artificial interbank market. Financial institutions stipulate lending agreements following a public recommendation and their individual information.…
We model a network economy with three sectors: downstream firms, upstream firms, and banks. Agents are linked by productive and credit relationships so that the behavior of one agent influences the behavior of the others through network…
The question of how to stabilize financial systems has attracted considerable attention since the global financial crisis of 2007-2009. Recently, Beale et al. ("Individual versus systemic risk and the regulator's dilemma", Proc Natl Acad…
Any economic agent constituting the monetary economy maintains the activity of monetary flow equilibration for fulfilling the condition of monetary flow continuity in the record, except at the central bank. At the same time, monetary flow…
We consider an illiquid financial market with different regimes modeled by a continuous-time finite-state Markov chain. The investor can trade a stock only at the discrete arrival times of a Cox process with intensity depending on the…
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…