Related papers: Using Network Interbank Contagion in Bank Default …
Credit default risk arises from complex interactions among borrowers, financial institutions, and transaction-level behaviors. While strong tabular models remain highly competitive in credit scoring, they may fail to explicitly capture…
The use of credit cards has recently increased, creating an essential need for credit card assessment methods to minimize potential risks. This study investigates the utilization of machine learning (ML) models for credit card default…
This paper introduces a credit risk rating model for credit risk assessment in quantitative finance, aiming to categorize borrowers based on their behavioral data. The model is trained on data from Experian, a widely recognized credit…
This paper studies the consequences of capturing non-linear dependence among the covariates that drive the default of different obligors and the overall riskiness of their credit portfolio. Joint default modeling is, without loss of…
We study the impact of contagion in a network of firms facing credit risk. We describe an intensity based model where the homogeneity assumption is broken by introducing a random environment that makes it possible to take into account the…
The 2023 U.S. banking crisis propagated not through direct financial linkages but through a high-frequency, information-based contagion channel. This paper moves beyond exploration analysis to test the "too-similar-to-fail" hypothesis,…
We consider a model of financial contagion in a bipartite network of assets and banks recently introduced in the literature, and we study the effect of power law distributions of degree and balance-sheet size on the stability of the system.…
This paper considers mutual obligations in the interconnected bank system and analyzes their influence on joint and marginal survival probabilities as well as CDS and FTD prices for the individual banks. To make the role of mutual…
Digital banking and online communication have made modern bank runs faster and more networked than the canonical queue-at-the-branch setting. While equilibrium models explain why strategic complementarities generate run risk, they offer…
The risk of a credit portfolio depends crucially on correlations between the probability of default (PD) in different economic sectors. Often, PD correlations have to be estimated from relatively short time series of default rates, and the…
This study investigates the functioning of modern payment systems through the lens of banks' maturity mismatch practices, and it examines the effects of banks' refusal to roll over short-term interbank liabilities on financial stability.…
We study multiple defaults where the global market information is modelled as progressive enlargement of filtrations. We shall provide a general pricing formula by establishing a relationship between the enlarged filtration and the…
Loan default prediction is one of the most important and critical problems faced by banks and other financial institutions as it has a huge effect on profit. Although many traditional methods exist for mining information about a loan…
The instability of financial system issues might trigger a bank failure, evoke spillovers, and generate contagion effects which negatively impacted the financial system, ultimately on the economy. This phenomenon is the result of the highly…
The recent "correlation breakdown" in the modeling of credit default swaps, in which model correlations had to exceed 100% in order to reproduce market prices of supersenior tranches, is analyzed and argued to be a fundamental market…
The recent financial crisis of 2008 and the 2011 indebtedness of Greece highlight the importance of understanding the structure of the global financial network. In this paper we set out to analyze and characterize this network, as captured…
A standard quantitative method to access credit risk employs a factor model based on joint multivariate normal distribution properties. By extending a one-factor Gaussian copula model to make a more accurate default forecast, this paper…
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…
We study insolvency cascades in an interbank system when banks are allowed to insure their loans with credit default swaps (CDS) sold by other banks. We show that, by properly shifting financial exposures from one institution to another, a…
Small and Medium-sized Enterprises (SMEs) are known to play a vital role in economic growth, employment, and innovation. However, they tend to face significant challenges in accessing credit due to limited financial histories, collateral…