Related papers: Modeling Financial System with Interbank Flows, Bo…

How does public debt matter for price stability? If it is useful for the private sector to insure idiosyncratic risk, even transitory government debt expansions can exert upward pressure on interest rates and create inflation. As I…

In this paper, we study the optimal investment problem of an insurer whose surplus process follows the diffusion approximation of the classical Cramer-Lundberg model. Investment in the foreign market is allowed, and therefore, the foreign…

We consider the problem faced by a central bank which bails out distressed financial institutions that pose systemic risk to the banking sector. In a structural default model with mutual obligations, the central agent seeks to inject a…

This paper develops a new model of business cycles. The model is economical in that it is solved with an aggregate demand-aggregate supply diagram, and the effects of shocks and policies are obtained by comparative statics. The model builds…

This paper develops a dynamic monetary model to study the (in)stability of the fractional reserve banking system. The model shows that the fractional reserve banking system can endanger stability in that equilibrium is more prone to exhibit…

We present a macroeconomic agent-based model that combines several mechanisms operating at the same timescale, while remaining mathematically tractable. It comprises enterprises and workers who compete in a job market and a commodity goods…

In this paper, we propose a dynamical model to capture cascading failures among interconnected organizations in the global financial system. Failures can take the form of bankruptcies, defaults, and other insolvencies. The network that…

We explore a model of the interaction between banks and outside investors in which the ability of banks to issue inside money (short-term liabilities believed to be convertible into currency at par) can generate a collapse in asset prices…

We provide an overview of the relationship between financial networks and systemic risk. We present a taxonomy of different types of systemic risk, differentiating between direct externalities between financial organizations (e.g.,…

A simple banking network model is proposed which features multiple waves of bank defaults and is analytically solvable in the limiting case of an infinitely large homogeneous network. The model is a collection of nodes representing…

The instability of the financial system as experienced in recent years and in previous periods is often linked to credit defaults, i.e., to the failure of obligors to make promised payments. Given the large number of credit contracts, this…

This paper considers the problem of consumption and investment in a financial market within a continuous time stochastic economy. The investor exhibits a change in the discount rate. The investment opportunities are a stock and a riskless…

In this paper, making use of recent statistical physics techniques and models, we address the specific role of randomness in financial markets, both at the micro and the macro level. In particular, we review some recent results obtained…

A financial market is a system resulting from the complex interaction between participants in a closed economy. We propose a minimal microscopic model of the financial market economy based on the real economy's symmetry constraint and…

In the large financial market, which is described by a model with countably many traded assets, we formulate the problem of the expected utility maximization. Assuming that the preferences of an economic agent are modeled with a stochastic…

We study the system of heterogeneous interbank lending and borrowing based on the relative average of log-capitalization given by the linear combination of the average within groups and the ensemble average and describe the evolution of…

This paper investigates how dispersion in banks' subjective inflation forecasts is a channel of the transmission of monetary policy to credit supply. We extend the Monti-Klein model of monopolistic banking by incorporating risk aversion,…

Interbank contagion can theoretically exacerbate losses in a financial system and lead to additional cascade defaults during downturn. In this paper we produce default analysis using both regression and neural network models to verify…

We analyze a class of stochastic differential games of singular control, motivated by the study of a dynamic model of interbank lending with benchmark rates. We describe Pareto optima for this game and show how they may be achieved through…

The paper tests the validity of the critique of the fiscal theory of the price level. A stochastic general equilibrium model with continuous time is constructed. An active fiscal policy and a passive monetary policy have been set. Monetary…