Related papers: Default Contagion with Domino Effect , A First Pas…
A recent paper proposing a model of the limiting speed of the domino effect is discussed with reference to its need and the need of models in general for validation against experimental data. It is shown that the proposed model diverges…
The current global financial system forms a highly interconnected network where a default in one of its nodes can propagate to many other nodes, causing a catastrophic avalanche effect. In this paper we consider the problem of reducing the…
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…
We model the default contagion process in a large heterogeneous financial network under the interventions of a regulator (a central bank) with only partial information which is a more realistic setting than most current literature. We…
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…
We consider a structural default model in an interconnected banking network as in Lipton [International Journal of Theoretical and Applied Finance, 19(6), 2016], with mutual obligations between each pair of banks. We analyse the model…
We consider structural credit modeling in the important special case where the log-leverage ratio of the firm is a time-changed Brownian motion (TCBM) with the time-change taken to be an independent increasing process. Following the…
Yet often neglected, dynamical interdependencies between concomitant contagion processes can alter their intrinsic equilibria and bifurcations. A particular case of interest for disease control is the emergence of explosive transitions in…
We propose a semi-structured discrete-time multi-state model to analyse mortgage delinquency transitions. This model combines an easy-to-understand structured additive predictor, which includes linear effects and smooth functions of time…
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…
This paper introduces a novel framework to study default dependence and systemic risk in a financial network that evolves over time. We analyse several indicators of risk, and develop a new latent space model to assess the health of key…
In this paper, we deal with an axiomatic approach to default risk. We introduce the notion of a default risk measure, which generalizes the classical probability of default (PD), and allows to incorporate model risk in various forms. We…
In this paper we analyze the resilience of a network of banks to joint price fluctuations of the external assets in which they have shared exposures, and evaluate the worst-case effects of the possible default contagion. Indeed, when the…
In this paper we give a financial justification, based on non arbitrage conditions, of the $(H)$ hypothesis in default time modelling. We also show how the $(H)$ hypothesis is affected by an equivalent change of probability measure. The…
We study large deviations and rare default clustering events in a dynamic large heterogeneous portfolio of interconnected components. Defaults come as Poisson events and the default intensities of the different components in the system…
This work focuses on financial risks from a probabilistic point of view. The value of a firm is described as a geometric Brownian motion and default emerges as a first passage time event. On the technical side, the critical threshold that…
The physics of a row of toppling dominoes is discussed. In particular the forces between the falling dominoes are analyzed and with this knowledge, the effect of friction has been incorporated. A set of limiting situations is discussed in…
A load sharing system has several components and the failure of one component can affect the lifetime of the surviving components. Since component failure does not equate to system failure for different system designs, the analysis of the…
We compare observed corporate cumulative default probabilities to those calculated using a stochastic model based on an extension of the work of Black and Cox and find that corporations default as if via diffusive dynamics. The model, based…
Within the context of first order phase transitions in the early universe, we study the influence of a coupling between the (global U(1)) scalar driving the transition and the rest of the matter content of the theory. The effect of the…