Related papers: Systemic-risk-efficient asset allocation: Minimiza…
Online portfolio selection is an integral componentof wealth management. The fundamental undertaking is tomaximise returns while minimising risk given investor con-straints. We aim to examine and improve modern strategiesto generate higher…
We derive the default cascade model and the fire-sale spillover model in a unified interdependent framework. The interactions among banks include not only direct cross-holding, but also indirect dependency by holding mutual assets outside…
The 2008 financial crisis illustrated the need for a thorough, functional understanding of systemic risk in strongly interconnected financial structures. Dynamic processes on complex networks being intrinsically difficult, most recent…
We introduce a technique that is capable to filter out information from complex systems, by mapping them to networks, and extracting a subgraph with the strongest links. This idea is based on the Minimum Spanning Tree, and it can be applied…
Systemic risk measures were introduced to capture the global risk and the corresponding contagion effects that is generated by an interconnected system of financial institutions. To this purpose, two approaches were suggested. In the first…
Research capacity is critical in understanding systemic risk and informing new regulation. Banking regulation has not kept pace with all the complexities of financial innovation. The academic literature on systemic risk is rapidly…
In today's global economy, supply chain (SC) entities have become increasingly interconnected with demand and supply relationships due to the need for strategic outsourcing. Such interdependence among firms not only increases efficiency but…
Portfolio optimization has been a central problem in finance, often approached with two steps: calibrating the parameters and then solving an optimization problem. Yet, the two-step procedure sometimes encounter the "error maximization"…
As it is known in the finance risk and macroeconomics literature, risk-sharing in large portfolios may increase the probability of creation of default clusters and of systemic risk. We review recent developments on mathematical and…
We examine optimal regulation of financial networks with debt interdependencies between financial firms. We first show that firms often have an incentive to choose excessively risky portfolios and overly correlate their portfolios with…
We consider the problem of the statistical uncertainty of the correlation matrix in the optimization of a financial portfolio. We show that the use of clustering algorithms can improve the reliability of the portfolio in terms of the ratio…
The study of systemic risk is often presented through the analysis of several measures referring to quantities used by practitioners and policy makers. Almost invariably, those measures evaluate the size of the impact that exogenous events…
We study investment and insurance demand decisions for an agent in a theoretical continuous-time expected utility maximization model that combines risky assets with an (exogenous) insurable background risk. This risk takes the form of a…
We revisit the problem of portfolio selection, where an investor maximizes utility subject to a risk constraint. Our framework is very general and accommodates a wide range of utility and risk functionals, including non-concave utilities…
Firms in inter-organizational networks such as supply chains or strategic alliances are exposed to interdependent risks. These are risks that are transferable across partner firms. They can be decomposed into intrinsic risks a firm faces…
We consider a large random network, in which the performance of a node depends upon that of its neighbours and some external random influence factors. This results in random vector valued fixed-point (FP) equations in large dimensional…
We study the ex-ante minimization of market inefficiency, defined in terms of minimum deviation of market prices from fundamental values, from a centralized planner's perspective. Prices are pressured from exogenous trading actions of…
This paper provides a general framework for modeling financial contagion in a system with obligations in multiple illiquid assets (e.g., currencies). In so doing, we develop a multi-layered financial network that extends the single network…
We propose an end-to-end distributionally robust system for portfolio construction that integrates the asset return prediction model with a distributionally robust portfolio optimization model. We also show how to learn the risk-tolerance…
We present the first application of modern Hopfield networks to the problem of portfolio optimization. We performed an extensive study based on combinatorial purged cross-validation over several datasets and compared our results to both…