Related papers: Modeling Financial System with Interbank Flows, Bo…
An agent-based model for firms' dynamics is developed. The model consists of firm agents with identical characteristic parameters and a bank agent. Dynamics of those agents is described by their balance sheets. Each firm tries to maximize…
The global financial crisis in 2007-2009 demonstrated that systemic risk can spread all over the world through a complex web of financial linkages, yet we still lack fundamental knowledge about the evolution of the financial web. In…
We propose a model of inter-bank lending and borrowing which takes into account clearing debt obligations. The evolution of log-monetary reserves of $N$ banks is described by coupled diffusions driven by controls with delay in their drifts.…
We propose a simple model of the banking system incorporating a game feature where the evolution of monetary reserve is modeled as a system of coupled Feller diffusions. The Markov Nash equilibrium generated through minimizing the linear…
Which level of inflation should Central Banks be targeting? We investigate this issue in the context of a simplified Agent Based Model of the economy. Depending on the value of the parameters that describe the behaviour of agents (in…
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 investigate the full dynamics of capital allocation and wealth distribution of heterogeneous agents in a frictional economy during booms and busts using tools from mean-field games. Two groups in our models, namely the expert and the…
Widespread default involves substantial deadweight costs which could be countered by injecting capital into failing firms. Injections have positive spillovers that can trigger a repayment cascade. But which firms should a regulator bailout…
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…
We discuss a class of debt management problems in a stochastic environment model. We propose a model for the debt-to-GDP (Gross Domestic Product) ratio where the government interventions via fiscal policies affect the public debt and the…
The scope of financial systemic risk research encompasses a wide range of interbank channels and effects, including asset correlation shocks, default contagion, illiquidity contagion, and asset fire sales. This paper introduces a financial…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
We consider a dynamic model of interconnected banks. New banks can emerge, and existing banks can default, creating a birth-and-death setup. Microscopically, banks evolve as independent geometric Brownian motions. Systemic effects are…
The aim of this paper is to quantify and manage systemic risk caused by default contagion in the interbank market. We model the market as a random directed network, where the vertices represent financial institutions and the weighted edges…
The money market and the capital market of the Indian financial markets have a symbiotic relationship in the development of the Indian economy. The nature and the characteristics of the markets differ to a large extent as the money market…
We investigate the macroeconomic consequences of narrow banking in the context of stock-flow consistent models. We begin with an extension of the Goodwin-Keen model incorporating time deposits, government bills, cash, and central bank…
We study an optimal investment problem under default risk where related information such as loss or recovery at default is considered as an exogenous random mark added at default time. Two types of agents who have different levels of…
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…
Factor models characterize the joint behavior of large sets of financial assets through a smaller number of underlying drivers. We develop a network-based framework in which factors emerge naturally from the structure of interactions among…
We investigate activities that have different periods of duration. We define the profit intensity as a measure of this economic category. The profit intensity in a repeated trading has a unique property of attaining its maximum at a fixed…