Related papers: Mathematical Analysis of Dynamic Risk Default in M…
Microfinance, despite its significant potential for poverty reduction, is facing sustainability hardships due to high default rates. Although many methods in regular finance can estimate credit scores and default probabilities, these…
We design a system for risk-analyzing and pricing portfolios of non-performing consumer credit loans. The rapid development of credit lending business for consumers heightens the need for trading portfolios formed by overdue loans as a…
The existence of asymmetric information has always been a major concern for financial institutions. Financial intermediaries such as commercial banks need to study the quality of potential borrowers in order to make their decision on…
We propose some machine-learning-based algorithms to solve hedging problems in incomplete markets. Sources of incompleteness cover illiquidity, untradable risk factors, discrete hedging dates and transaction costs. The proposed algorithms…
In this paper, we present a simple microeconomic model with linear continuous-time dynamics that describes a production-inventory system with debt repayment. This model is formulated in terms of optimal control and its exact solutions are…
This paper gives a brief overview on the nonparametric techniques that are useful for financial econometric problems. The problems include estimation and inferences of instantaneous returns and volatility functions of time-homogeneous and…
We consider the problem of governing systemic risk in an assets-liabilities dynamical model of banking system. In the model considered each bank is represented by its assets and its liabilities.The capital reserves of a bank are the…
The instability of the financial system as experienced in recent years and in previous periods is often linked to credit defaults, i.e., to the failure of obligors to make promised payments. Given the large number of credit contracts, this…
The aim of this paper is to quantify and manage systemic risk caused by default contagion in the interbank market. We model the market as a random directed network, where the vertices represent financial institutions and the weighted edges…
A novel procedure is presented for the objective comparison and evaluation of a bank's decision rules in optimising the timing of loan recovery. This procedure is based on finding a delinquency threshold at which the financial loss of a…
Inspired by recent ideas on how the analysis of complex financial risks can benefit from analogies with independent research areas, we propose an unorthodox framework for mapping microfinance credit risk---a major obstacle to the…
We solve non-Markovian optimal switching problems in discrete time on an infinite horizon, when the decision maker is risk aware and the filtration is general, and establish existence and uniqueness of solutions for the associated reflected…
Complex non-linear interactions between banks and assets we model by two time-dependent Erd\H{o}s Renyi network models where each node, representing bank, can invest either to a single asset (model I) or multiple assets (model II). We use…
The events of the last few years revealed an acute need for tools to systematically model and analyze large financial networks. Many applications of such tools include the forecasting of systemic failures and analyzing probable effects of…
We consider an optimal investment and risk control problem for an insurer under the mean-variance (MV) criterion. By introducing a deterministic auxiliary process defined forward in time, we formulate an alternative time-consistent problem…
The lifetime behaviour of loans is notoriously difficult to model, which can compromise a bank's financial reserves against future losses, if modelled poorly. Therefore, we present a data-driven comparative study amongst three techniques in…
A model is developed to assess the profitability of loans or mortgages with a specified repayment schedule. Financial institutions face two competing risks: default and prepayment, both influenced by the stochastic evolution of credit…
We study financial networks where banks are connected through bilateral liabilities and may default when resources are insufficient to meet obligations. We consider both the standard proportional clearing model and a priority-proportional…
Inspired by the double-debt problem in Japan where the mortgagor has to pay the remaining loan even if their house was destroyed by a catastrophic event, we model the lender's cash flow, by an exponential functional of a renewal-reward…
The purpose of this research article is to discover how the econophysics analysis can complement the econometrics models in application to the risk management in the central banks and financial institutions, operating within the nonlinear…