Related papers: Modeling Financial System with Interbank Flows, Bo…
This paper considers the problem faced by a bank which trades in the funds market so as to maintain the reserve requirements and minimize the costs of doing that. We work in a stochastic paradigm and the reserve requirements are determined…
Kinetic exchange models have been successful in explaining the shape of the income/wealth distribution in the economies. However, such models usually make some ad-hoc assumptions when it comes to determining the savings factor. Here, we…
In a previous work, we applied a field formalism to analyze capital allocation and accumulation within a network of investors and firms. In that framework, financial agents could invest in firms or in other investors, and banks-introduced…
Complex non-linear interactions between banks and assets we model by two time-dependent Erd\H{o}s Renyi network models where each node, representing bank, can invest either to a single asset (model I) or multiple assets (model II). We use…
Consider the problem of a government that wants to reduce the debt-to-GDP (gross domestic product) ratio of a country. The government aims at choosing a debt reduction policy which minimises the total expected cost of having debt, plus the…
In this work we study the individual strategies carried out by agents undergoing transactions in wealth exchange models. We analyze the role of risk propensity in the behavior of the agents and find a critical risk, such that agents with…
We consider a portfolio optimization problem in a defaultable market with finitely-many economical regimes, where the investor can dynamically allocate her wealth among a defaultable bond, a stock, and a money market account. The market…
Agent-based models provide a constructive approach to studying emergent dynamics in life-like systems composed of interacting, adaptive agents. Financial markets serve as a canonical example of such systems, where collective price dynamics…
I characterize optimal government policy in a sticky-price economy with different types of consumers and endogenous financial constraints in the banking and entrepreneurial sectors. The competitive equilibrium allocation is constrained…
In this paper, we study an intertemporal utility maximization problem in which an investor chooses consumption and portfolio strategies in the presence of a stochastic factor and a no-borrowing constraint. In the spirit of the Kim-Omberg…
The paper models foreign capital inflow from the developed to the developing countries in a stochastic dynamic programming (SDP) framework. Under some regularity conditions, the existence of the solutions to the SDP problem is proved and…
Evaluation of systemic risk in networks of financial institutions in general requires information of inter-institution financial exposures. In the framework of Debt Rank algorithm, we introduce an approximate method of systemic risk…
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…
In this paper, we study a stochastic optimal control problem with stochastic volatility. We prove the sufficient and necessary maximum principle for the proposed problem. Then we apply the results to solve an investment, consumption and…
We have studied here the self-organising features of the dynamics of a model market, where the agents `trade' for a single commodity with their money. The model market consists of fixed numbers of economic agents, money supply and…
We propose a frustrated and disordered many-body model of a stockmarket in which independent adaptive traders can trade a stock subject to the economic law of supply and demand. We show that the typical scaling properties and the correlated…
We study a model in which two players with opposing interests try to alter a status quo through instability-generating actions. We show that instability can be used to secure longer-term durable changes, even if it is costly to generate and…
We adress the maximization problem of expected utility from terminal wealth. The special feature of this paper is that we consider a financial market where the price process of risky assets can have a default time. Using dynamic…
We introduce a simple model for addressing the controversy in the study of financial systems, sometimes taken as brownian-like processes and other as critical systems with fluctuations of arbitrary magnitude. The model considers a…
In this paper we introduce a generalized extension of the Eisenberg-Noe model of financial contagion to allow for time dynamics of the interbank liabilities, including a dynamic examination of default risk. This framework separates the cash…