Related papers: Empirical facts characterizing banking crises: an …
In normal times, it is assumed that financial institutions operating in non-overlapping sectors have complementary and distinct outcomes, typically reflected in mostly uncorrelated outcomes and asset returns. Such is the reasoning behind…
We investigate the tendency for financial instruments to form clusters when there are multiple factors influencing the correlation structure. Specifically, we consider a stock portfolio which contains companies from different industrial…
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…
Trust lies at the crux of most economic transactions, with credit markets being a notable example. Drawing on insights from the literature on coordination games and network growth, we develop a simple model to clarify how trust breaks down…
In this paper, we employ Credit Default Swaps (CDS) to model the joint and conditional distress probabilities of banks in Europe and the U.S. using factor copulas. We propose multi-factor, structured factor, and factor-vine models where the…
The study of the critical dynamics in complex systems is always interesting yet challenging. Here, we choose financial market as an example of a complex system, and do a comparative analyses of two stock markets - the S&P 500 (USA) and…
The latest financial crisis has painfully revealed the dangers arising from a globally interconnected financial system. Conventional approaches based on the notion of the existence of equilibrium and those which rely on statistical…
Financial contagion from liquidity shocks has being recently ascribed as a prominent driver of systemic risk in interbank lending markets. Building on standard compartment models used in epidemics, in this work we develop an EDB…
Credit and liquidity risks represent main channels of financial contagion for interbank lending markets. On one hand, banks face potential losses whenever their counterparties are under distress and thus unable to fulfill their obligations.…
Following the financial crisis of 2007-2008, a deep analogy between the origins of instability in financial systems and complex ecosystems has been pointed out: in both cases, topological features of network structures influence how easily…
Financial crises are known as crashes that result in a sudden loss of value of financial assets in large part and they continue to occur from time to time surprisingly. In order to discover features of the financial network, the pairwise…
We study cross-country GDP losses due to financial crises in terms of frequency (number of loss events per period) and severity (loss per occurrence). We perform the Loss Distribution Approach (LDA) to estimate a multi-country aggregate GDP…
Based on an empirical analysis of the network structure of the Austrian inter-bank market, we study the flow of funds through the banking network following exogenous shocks to the system. These shocks are implemented by stochastic changes…
The global financial crisis in 2007-2009 demonstrated that systemic risk can spread all over the world through a complex web of financial linkages, yet we still lack fundamental knowledge about the evolution of the financial web. In…
Cross-border equity and long-term debt securities portfolio investment networks are analysed from 2002 to 2012, covering the 2008 global financial crisis. They serve as network-proxies for measuring the robustness of the global financial…
Common asset holding by financial institutions, namely portfolio overlap, is nowadays regarded as an important channel for financial contagion with the potential to trigger fire sales and thus severe losses at the systemic level. In this…
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…
In order to figure out and to forecast the emergence phenomena of social systems, we propose several probabilistic models for the analysis of financial markets, especially around a crisis. We first attempt to visualize the collective…
To identify emerging interdependencies between traded stocks we investigate the behavior of the stocks of FTSE 100 companies in the period 2000-2015, by looking at daily stock values. Exploiting the power of information theoretical measures…
The importance of adequately modeling credit risk has once again been highlighted in the recent financial crisis. Defaults tend to cluster around times of economic stress due to poor macro-economic conditions, {\em but also} by directly…