Related papers: The Interaction Between Credit Constraints and Unc…
Resilience characterizes a system's ability to retain its original function when perturbations happen. In the past years our attention mainly focused on small-scale resilience, yet our understanding of resilience in large-scale network…
We exploit a continuous time random walk description of stock prices to obtain a fast and accurate evaluation of their volatility from intraday data. We show that financial markets are usefully described as open physical systems. Indeed we…
Empirical data reveals that the liquidity flow into the order book (depositions, cancellations andmarket orders) is influenced by past price changes. In particular, we show that liquidity tends todecrease with the amplitude of past…
Over-the-counter derivatives have contributed significantly to the effectiveness and efficiency of the international financial system but also entail significant counterparty credit risk. Collateralization is one of the most important and…
Natural and anthropogenic disasters frequently affect both the supply and demand side of an economy. A striking recent example is the Covid-19 pandemic which has created severe disruptions to economic output in most countries. These direct…
Data on hundreds of variables related to individual consumer finance behavior (such as credit card and loan activity) is routinely collected in many countries and plays an important role in lending decisions. We postulate that the detailed…
We introduce a mathematical theory called market connectivity that gives concrete ways to both measure the efficiency of markets and find inefficiencies in large markets. The theory leads to new methods for testing the famous efficient…
The dynamic network of relationships among corporations underlies cascading economic failures including the current economic crisis, and can be inferred from correlations in market value fluctuations. We analyze the time dependence of the…
This paper studies the transmission of US monetary policy shocks into Emerging Markets emphasizing the role of investment and financial heterogeneity. First, we use a panel SVAR model to show that a US interest tightening leads to a…
The electricity industry is heavily implementing smart grid technologies to improve reliability, availability, security, and efficiency. This implementation needs technological advancements, the development of standards and regulations, as…
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…
Whilst an abundance of techniques have recently been proposed to generate counterfactual explanations for the predictions of opaque black-box systems, markedly less attention has been paid to exploring the uncertainty of these generated…
Using a modified damped harmonic oscillator model equivalent to a model of market dynamics with price expectations, we analyze the reaction of financial markets to shocks. In order to do this, we gather data from indices of a variety of…
We estimate generic statistical properties of a structural credit risk model by considering an ensemble of correlation matrices. This ensemble is set up by Random Matrix Theory. We demonstrate analytically that the presence of correlations…
We propose a method to learn the nonlinear impulse responses to structural shocks using neural networks, and apply it to uncover the effects of US financial shocks. The results reveal substantial asymmetries with respect to the sign of the…
We study the risk assessment of uncertain cash flows in terms of dynamic convex risk measures for processes as introduced in Cheridito, Delbaen, and Kupper (2006). These risk measures take into account not only the amounts but also the…
This paper analyzes the bank lending channel and the heterogeneous effects on the euro area, providing evidence that the channel is indeed working. The analysis of the transmission mechanism is based on structural impulse responses to an…
The 2008 global financial crisis marked the beginning of a decade dominated by fiscal austerity policies in much of the developed world. This paper presents a qualitative narrative review of an extensive collection of academic literature to…
I sketch a program for a microeconomic theory of the main component of the business cycle as a recurring disequilibrium, driven by incompleteness of the financial market and by information asymmetries between borrowers and lenders. This…
A minimal stochastic dynamical model of the interbank network is introduced, with linear interactions mediated by an integral of recent variations. Defining stress as the variance over the banks' states, the interaction correction to the…