Related papers: Systemic-risk-efficient asset allocation: Minimiza…
In this paper we estimate the propagation of liquidity shocks through interbank markets when the information about the underlying credit network is incomplete. We show that techniques such as Maximum Entropy currently used to reconstruct…
We consider the problem of optimizing a portfolio of financial assets, where the number of assets can be much larger than the number of observations. The optimal portfolio weights require estimating the inverse covariance matrix of excess…
In this paper, we present an artificial neural network framework for portfolio compression of a large portfolio of European options with varying maturities (target portfolio) by a significantly smaller portfolio of European options with…
Risk diversification is the basis of insurance and investment. It is thus crucial to study the effects that could limit it. One of them is the existence of systemic risk that affects all the policies at the same time. We introduce here a…
We consider a variation on the classical finance problem of optimal portfolio design. In our setting, a large population of consumers is drawn from some distribution over risk tolerances, and each consumer must be assigned to a portfolio of…
We present an analytical model to study the role of expectation feedbacks and overlapping portfolios on systemic stability of financial systems. Building on [Corsi et al., 2016], we model a set of financial institutions having Value at Risk…
The theory of multilayer networks is in its early stages, and its development provides vital methods for understanding complex systems. Multilayer networks, in their multiplex form, have been introduced within the last three years to…
In this paper we consider reinsurance or risk sharing from a macroeconomic point of view. Our aim is to find socially optimal reinsurance treaties. In our setting we assume that there are $n$ insurance companies each bearing a certain risk…
In this paper we consider the problem of minimising drawdown in a portfolio of financial assets. Here drawdown represents the relative opportunity cost of the single best missed trading opportunity over a specified time period. We formulate…
For centuries, national economies created wealth by engaging in international trade and production. The resulting international supply networks not only increase wealth for countries, but also create systemic risk: economic shocks,…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading amounts, transaction costs and different rates for borrowing and lending when the risky asset returns are serially correlated. No…
In the context of understanding the nature of the risk transformation process of the financial system we propose an iterative risk-trading game between several agents who build their trading strategies based on a general utility setting.…
When banks extend loans to each other, they generate a negative externality in the form of systemic risk. They create a network of interbank exposures by which they expose other banks to potential insolvency cascades. In this paper, we show…
How, and to what extent, does an interconnected financial system endogenously amplify external shocks? This paper attempts to reconcile some apparently different views emerged after the 2008 crisis regarding the nature and the relevance of…
This study presents an ANWSER model (asset network systemic risk model) to quantify the risk of financial contagion which manifests itself in a financial crisis. The transmission of financial distress is governed by a heterogeneous bank…
The aim of this paper is to study a new methodological framework for systemic risk measures by applying deep learning method as a tool to compute the optimal strategy of capital allocations. Under this new framework, systemic risk measures…
We develop a novel stress-test framework to monitor systemic risk in financial systems. The modular structure of the framework allows to accommodate for a variety of shock scenarios, methods to estimate interbank exposures and mechanisms of…
This work proposes a unified framework for portfolio allocation, covering both asset selection and optimization, based on a multiple-hypothesis predict-then-optimize approach. The portfolio is modeled as a structured ensemble, where each…
Cyber risk has become a critical financial threat in today's interconnected digital economy. This paper introduces a cyber-risk management framework for networked digital systems that combines the strategic behavior of players with…
The dynamics of protection processes has been a fundamental challenge in systemic risk analysis. The conceptual principle and methodological techniques behind the mechanisms involved [in such dynamics] have been harder to grasp than…