Related papers: The Interaction Between Credit Constraints and Unc…
Procyclicality of historical risk measure estimation means that one tends to over-estimate future risk when present realized volatility is high and vice versa under-estimate future risk when the realized volatility is low. Out of it…
How a shock to an individual sector propagates to the prices of other sectors and aggregates to GDP depends on how easily sectoral goods can be substituted in production, which is determined by the intermediate input substitution…
Realistic credit risk assessment, the estimation of losses from counterparty's failure, is central for the financial stability. Credit risk models focus on the financial conditions of borrowers and only marginally consider other risks from…
The monetary transmission channel is disrupted by many factors, especially securitization and liquidity traps. In our study we try to estimate the effect of securitization on the interest elasticity and to identify if a liquidity trap…
We study how the climate transition through a low-carbon economy, implemented by carbon pricing, propagates in a credit portfolio and precisely describe how carbon price dynamics affects credit risk measures such as probability of default,…
We study analytically and numerically Minsky instability as a combination of top-down, bottom-up and peer-to-peer positive feedback loops. The peer-to-peer interactions are represented by the links of a network formed by the connections…
We construct a price impact model between stocks in a correlated market. For the price change of a given stock induced by the short-run liquidity of this stock itself and of the information about other stocks, we introduce a self- and a…
We propose a minimal model of the secured interbank network able to shed light on recent money markets puzzles. We find that excess liquidity emerges due to the interactions between the reserves and liquidity ratio constraints; the…
We propose a simple framework to measure consumption insurance against income shocks that accounts for higher-order moments of the income distribution. We derive a nonlinear consumption function in which the extent of insurance varies with…
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 set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump--diffusion process for the risk factors, i.e. for the company assets. We also include correlations…
We investigate the consequences of legal rulings on the conduct of monetary policy. Several unconventional monetary policy measures of the European Central Bank have come under scrutiny before national courts and the European Court of…
We report a study of a stylized banking cascade model investigating systemic risk caused by counter party failure using liabilities and assets to define banks' balance sheet. In our stylized system, banks can be in two states: normally…
We investigate the impact of available information on the estimation of the default probability within a generalized structural model for credit risk. The traditional structural model where default is triggered when the value of the firm's…
In this paper, we assess how the stability of financial networks is affected by interconnectedness considering its tiniest variation: the edge. We compute the impact of edges as the percentage difference in the systemic risk (SR) of the…
When it comes to studying the impacts of decision making, the research has been largely focused on examining the fairness of the decisions, the long-term effects of the decision pipelines, and utility-based perspectives considering both the…
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…
Changes in collateralization have been implicated in significant default (or near-default) events during the financial crisis, most notably with AIG. We have developed a framework for quantifying this effect based on moving between…
Higher shares of electricity generation from renewable energy sources and market liberalization is increasing uncertainty in power systems operation. At the same time, operation is becoming more flexible with improved control systems and…
This work is attached to the BRICS 2013 competition. We propose a two-stage model for dealing with the temporal degradation of credit scoring models. This methodology produced motivating results in a 1-year horizon. We anticipate that it…