Related papers: An assets-liabilities dynamical model of banking s…
We develop a dynamic multi-agent model of an interbank payment system where banks choose their level of available funds on the basis of private payoff maximisation. The model consists of the repetition of a simultaneous move stage game with…
In this paper we present a dynamic programing approach to stochastic optimal control problems with dynamic, time-consistent risk constraints. Constrained stochastic optimal control problems, which naturally arise when one has to consider…
We address the problem of banking system resilience by applying off-equilibrium statistical physics to a system of particles, representing the economic agents, modelled according to the theoretical foundation of the current banking…
We compare observed corporate cumulative default probabilities to those calculated using a stochastic model based on an extension of the work of Black and Cox and find that corporations default as if via diffusive dynamics. The model, based…
The paper proposes a new stochastic intervention control model conducted in various commodity and stock markets. The essence of the phenomenon of intervention is described in accordance with current economic theory. A review of papers on…
The current global financial system forms a highly interconnected network where a default in one of its nodes can propagate to many other nodes, causing a catastrophic avalanche effect. In this paper we consider the problem of reducing the…
Bank crisis is challenging to define but can be manifested through bank contagion. This study presents a comprehensive framework grounded in nonlinear time series analysis to identify potential early warning signals (EWS) for impending…
Financial markets are often modelled as if time were unique and continuous across assets and markets. Financial markets are however asynchronous, order flow is event-driven, and waiting times between events are often random. Many of the…
We develop a dynamic model of cascading failures in a financial network whereby cross-holdings are viewed as feedback, external assets investments as inputs and failure penalties as static nonlinearities. We provide sufficient milder and…
By treating the financial market as a thermodynamic system, we establish a one-to-one correspondence between thermodynamic variables and economic quantities. Measured by the expected loss under the worst-case scenario, financial risk caused…
We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
Earlier we proposed the stochastic point process model, which reproduces a variety of self-affine time series exhibiting power spectral density S(f) scaling as power of the frequency f and derived a stochastic differential equation with the…
This study presents an ANWSER model (asset network systemic risk model) to quantify the risk of financial contagion which manifests itself in a financial crisis. The transmission of financial distress is governed by a heterogeneous bank…
We have conducted an agent-based simulation of chain bankruptcy. The propagation of credit risk on a network, i.e., chain bankruptcy, is the key to nderstanding largesized bankruptcies. In our model, decrease of revenue by the loss of…
We introduce the resilience rate as a measure of financial resilience. It captures the expected rate at which a dynamic risk measure recovers, i.e., bounces back, when the risk-acceptance set is breached. We develop the corresponding…
We propose a unified structural credit risk model incorporating both insolvency and illiquidity risks, in order to investigate how a firm's default probability depends on the liquidity risk associated with its financing structure. We assume…
This paper investigates the structural dynamics of stock market volatility through the Financial Chaos Index, a tensor- and eigenvalue-based measure designed to capture realized volatility via mutual fluctuations among asset prices.…
We consider a market model where there are two levels of information. The public information generated by the financial assets, and a larger flow of information that contains additional knowledge about a random time. This random time can…
We study the system of heterogeneous interbank lending and borrowing based on the relative average of log-capitalization given by the linear combination of the average within groups and the ensemble average and describe the evolution of…
Assessing the stability of economic systems is a fundamental research focus in economics, that has become increasingly interdisciplinary in the currently troubled economic situation. In particular, much attention has been devoted to the…