Related papers: Ratio-Balanced Maximum Flows
Financial undertakings often have to deal with liabilities of the form 'non-hedgeable claim size times value of a tradeable asset', e.g. foreign property insurance claims times fx rates. Which strategy to invest in the tradeable asset is…
We build a balance sheet-based model to capture run risk, i.e., a reduced potential to raise capital from liquidity buffers under stress, driven by depositor scrutiny and further fueled by fire sales in response to withdrawals. The setup is…
Typically, operational risk losses are reported above a threshold. Fitting data reported above a constant threshold is a well known and studied problem. However, in practice, the losses are scaled for business and other factors before the…
This paper considers the problem of measuring the credit risk in portfolios of loans, bonds, and other instruments subject to possible default under multi-factor models. Due to the amount of the portfolio, the heterogeneous effect of…
We study probabilistic protocols for concurrent threshold-based load balancing in networks. There are n resources or machines represented by nodes in an undirected graph and m >> n users that try to find an acceptable resource by moving…
Maintaining a resilient computer network is a delicate task with conflicting priorities. Flows should be served while controlling risk due to attackers. Upon publication of a vulnerability, administrators scramble to manually mitigate risk…
We develop efficient algorithms to construct utility maximizing mechanisms in the presence of risk averse players (buyers and sellers) in Bayesian settings. We model risk aversion by a concave utility function, and players play…
Auto-deleveraging (ADL) mechanisms are a critical yet understudied component of risk management on cryptocurrency futures exchanges. When available margin and other loss-absorbing resources are insufficient to cover losses following large…
We propose a dynamical model for the estimation of Operational Risk in banking institutions. Operational Risk is the risk that a financial loss occurs as the result of failed processes. Examples of operational losses are the ones generated…
Consider an investor trading dynamically to maximize expected utility from terminal wealth. Our aim is to study the dependence between her risk aversion and the distribution of the optimal terminal payoff. Economic intuition suggests that…
The traditional multi-commodity flow problem assumes a given flow network in which multiple commodities are to be maximally routed in response to given demands. This paper considers the multi-commodity flow network-design problem: given a…
Credit risk scorecards are logistic regression models, fitted to large and complex data sets, employed by the financial industry to model the probability of default of a potential customer. In order to ensure that a scorecard remains a…
We define and study a lending game to model the interbank money market, in which lending banks strategically allocate their cash to borrowing banks. The interest rate offered by each borrowing bank is within the interest rate corridor set…
Banks in the interbank network can not assess the true risks associated with lending to other banks in the network, unless they have full information on the riskiness of all the other banks. These risks can be estimated by using network…
The paper provides a framework for the assessment and optimization of the total risk of complex distributed systems. The framework takes into account the risk of each agent, which may arise from heterogeneous sources, as well as the risk…
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…
Due to the importance of robustness in many real-world optimization problems, the field of robust optimization has gained a lot of attention over the past decade. We concentrate on maximum flow problems and introduce a novel robust…
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…
As economic entities become increasingly interconnected, a shock in a financial network can provoke significant cascading failures throughout the system. To study the systemic risk of financial systems, we create a bi-partite banking…
We assume that an agent's rate of consumption is {\it ratcheted}; that is, it forms a non-decreasing process. Given the rate of consumption, we act as financial advisers and find the optimal investment strategy for the agent who wishes to…