Related papers: Systemic Risk and the Dependence Structures
Perturbation analysis of Markov chains provides bounds on the effect that a change in a Markov transition matrix has on the corresponding stationary distribution. This paper compares and analyzes bounds found in the literature for finite…
In this paper we extend the series of our studies on the properties of an interacting particle model for market microstructure. In our earlier work we defined a Markov process on the majority opinion of the agents, obtained the transition…
In the present work we analyse the dynamics of indirect connections between insurance companies that result from market price channels. In our analysis we assume that the stock quotations of insurance companies reflect market sentiments…
In a previous paper, we applied a field formalism to analyze capital allocation and accumulation within a microeconomic framework of investors and firms. The financial connections were modeled by a field of stakes, representing the links…
The new notion of maturity-independent risk measures is introduced and contrasted with the existing risk measurement concepts. It is shown, by means of two examples, one set on a finite probability space and the other in a diffusion…
We study the stability properties of a susceptible-infected-susceptible (SIS) diffusion model, so-called the $n$-intertwined Markov model, over arbitrary directed network topologies. As in the majority of the work on infection spread…
Financial markets change their behaviours abruptly. The mean, variance and correlation patterns of stocks can vary dramatically, triggered by fundamental changes in macroeconomic variables, policies or regulations. A trader needs to adapt…
A problem with considering correlations in the analysis of multiagent system with stochastic packet loss is that they induce dependencies between agents that are otherwise decoupled, preventing the application of decomposition methods…
For nearly every major stock market there exist equity and implied volatility indices. These play important roles within finance: be it as a benchmark, a measure of general uncertainty or a way of investing or hedging. It is well known in…
We introduce a general model for the balance-sheet consistent valuation of interbank claims within an interconnected financial system. Our model represents an extension of clearing models of interdependent liabilities to account for the…
A Markov network characterizes the conditional independence structure, or Markov property, among a set of random variables. Existing work focuses on specific families of distributions (e.g., exponential families) and/or certain structures…
Modeling the dynamics of non-stationary stochastic systems requires balancing the representational power of deep learning with the mathematical transparency of classical models. While classical Markov transition operators provide explicit,…
Using particle system methodologies we study the propagation of financial distress in a network of firms facing credit risk. We investigate the phenomenon of a credit crisis and quantify the losses that a bank may suffer in a large credit…
This paper considers mutual obligations in the interconnected bank system and analyzes their influence on joint and marginal survival probabilities as well as CDS and FTD prices for the individual banks. To make the role of mutual…
The critical infrastructures of the nation such as the power grid and the communication network are highly interdependent. Also, it has been observed that there exists complex interdependent relationships between individual entities of the…
This article is concerned with stability analysis and stabilization of randomly switched nonlinear systems. These systems may be regarded as piecewise deterministic stochastic systems: the discrete switches are triggered by a stochastic…
We consider a network of bank holdings, where every holding has two subsidiaries of different types. A subsidiary can trade with another holding's subsidiary of the same type. Holdings support their subsidiaries up to a certain level when…
We propose and axiomatize preferences on a product state space in light of uncertainty regarding the dependency of different payoff-relevant factors. Dependence structures allow to decompose probabilities and allow to pin down behavior…
Financial markets are a typical example of complex systems where interactions between constituents lead to many remarkable features. Here, we show that a pairwise maximum entropy model (or auto-logistic model) is able to describe switches…
The increasing integration of world economies, which organize in complex multilayer networks of interactions, is one of the critical factors for the global propagation of economic crises. We adopt the network science approach to quantify…