Related papers: A Debt Management Problem with Currency Devaluatio…
Technical debt (TD) is a metaphor to describe the trade-off between short-term workarounds and long-term goals in software development. Despite being widely used to explain technical issues in business terms, industry and academia still…
We propose a new model of the liquidity driven banking system focusing on overnight interbank loans. This significant branch of the interbank market is commonly neglected in the banking system modeling and systemic risk analysis. We…
Interbank lending and borrowing occur when financial institutions seek to settle and refinance their mutual positions over time and circumstances. This interactive process involves money creation at the aggregate level. Coordination…
First passage models, where corporate assets undergo a random walk and default occurs if the assets fall below a threshold, provide an attractive framework for modeling the default process. Recently such models have been generalized to…
The issue of local government debt is widely recognized as one of the "gray rhinos" affecting the stable development of China's economy. Government debt can transmit risks to local banks, which are among the primary holders of local debt,…
The European sovereign debt crisis has impaired many European banks. The distress on the European banks may transmit worldwide, and result in a large-scale knock-on default of financial institutions. This study presents a computer…
Did sovereign default risk affect macroeconomic activity through firms' access to credit during the European sovereign debt crisis? We investigate this question by a estimating a structural panel vector autoregressive model for Italy,…
This study contributes to the discussion about how higher public debt may not be costly because of the negative interest rate-growth differentials by simulating OLG models introduced by Blanchard (2019) under uncertainty, showing debt and…
In this paper, we work in the framework of the Merton problem but we impose a drawdown constraint on the consumption process. This means that consumption can never fall below a fixed proportion of the running maximum of past consumption. In…
We introduce a prototype agent-based model of the macroeconomy, with budgetary constraints at its core. The model is related to a class of constraint satisfaction problems (CSPs), which has been thoroughly investigated in computer science.…
We propose a novel credit default model that takes into account the impact of macroeconomic information and contagion effect on the defaults of obligors. We use a set-valued Markov chain to model the default process, which is the set of all…
Valuing corporate bonds in systemic economies is challenging due to intricate webs of inter-institutional exposures. When a bank defaults, cascading losses propagate through the network, with payments determined by a system of fixed-point…
We estimate the causal effect of external debt on greenhouse gas emissions in a panel of 78 emerging market and developing economies over the 1990-2015 period. Unlike previous literature, we use external instruments to address the potential…
A currency with stable purchasing power can always provide a psychological haven for people around the world. However, since the collapse of the Bretton Woods system, issuing more cheap currencies has become a common trend in the…
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…
Elasticity is a cloud property that enables applications and its execution systems to dynamically acquire and release shared computational resources on demand. Moreover, it unfolds the advantage of economies of scale in the cloud through a…
This paper builds a finite-horizon model to study the role of physical collateral in a model of strategic defaults, when the borrower can develop reputation for honesty. Asset ownership increases attractiveness of the reputational channel:…
The emerging system at the European level can be conceptualized as a pattern of relations among member states that tends to be reproduced despite disturbances in individual trajectories. The Markov property is used as an indicator of…
Debt recycling is a leveraged equity management strategy in which homeowners use accumulated home equity to finance investments, applying the resulting returns to accelerate mortgage repayment. We propose a novel framework to model equity…
This paper considers optimal control problem of a large insurance company under a fixed insolvency probability. The company controls proportional reinsurance rate, dividend pay-outs and investing process to maximize the expected present…