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This paper studies an optimal investment and risk control problem for an insurer with default contagion and regime-switching. The insurer in our model allocates his/her wealth across multi-name defaultable stocks and a riskless bond under…
Micro-structural models of contagion and systemic risk emphasize that shock propagation is inherently multi-channel, spanning counterparty exposures, short-term funding and roll-over risk, securities cross-holdings, and common-asset…
The increasingly complex economic and financial environment in which we live makes the management of liquidity in payment systems and the economy in general a persistent challenge. New technologies are making it possible to address this…
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…
The tokenization of assets deployed to distributed ledger technology is increasingly cited to revolutionize financial services by allowing traditionally illiquid assets to be bought and sold on primary and secondary markets increasing asset…
In the wake of financial crises, stablecoins are gaining adoption among digital currencies. We discuss how stablecoins help reduce the volatility of cryptocurrencies by surveying different types of stablecoins and their stability…
Banks must optimize risky investments, dividend payouts, and capital structure under tight Basel III solvency and liquidity constraints, while costly equity issuance serves as a distress-recovery tool. We formulate this as a stochastic…
The process of contagiousness spread modelling is well-known in epidemiology. However, the application of spread modelling to banking market is quite recent. In this work, we present a system of ordinary differential equations, simulating…
The scope of financial systemic risk research encompasses a wide range of interbank channels and effects, including asset correlation shocks, default contagion, illiquidity contagion, and asset fire sales. This paper introduces a financial…
We study the frictions in the patterns of trades in the Euro money market. We characterize the structure of lending relations during the period of recent financial turmoil. We use network-topology method on data from overnight transactions…
This study explores the potential impact of introducing a Central Bank Digital Currency (CBDC) on financial stability in an emerging dual-currency economy (Romania), where the domestic currency (RON) coexists with the euro. It develops an…
In this work we introduce a model of default contagion that combines the approaches of Eisenberg-Noe interbank networks and dynamic mean field interactions. The proposed contagion mechanism provides an endogenous rule for early defaults in…
In order to scale transaction rates for deployment across the global web, many cryptocurrencies have deployed so-called "Layer-2" networks of private payment channels. An idealized payment network behaves like a Credit Network, a model for…
Measurement and management of credit concentration risk is critical for banks and relevant for micro-prudential requirements. While several methods exist for measuring credit concentration risk within institutions, the systemic effect of…
Increased penetration of wind energy will make electricity market prices more volatile. As a result, market participants will bear increased financial risks, which impact investment decisions and in turn, makes it harder to achieve…
We analyse time series of CDS spreads for a set of major US and European institutions on a pe- riod overlapping the recent financial crisis. We extend the existing methodology of {\epsilon}-drawdowns to the one of joint {\epsilon}-drawups,…
Against the widely held belief that diversification at banking institutions contributes to the stability of the financial system, Wagner (2010) found that diversification actually makes systemic crisis more likely. While it is true, as…
We consider a financial market with zero-coupon bonds that are exposed to credit and liquidity risk. We revisit the famous Jarrow & Turnbull setting in order to account for these two intricately intertwined risk types. We utilise the…
We study the effects on economic activity of a pure temporary change in government debt and the relationship between the debt multiplier and the level of debt in an overlapping generations framework. The debt multiplier is positive but…
Shaped by structural forces of change, banking in emerging markets has recently experienced a decline in its traditional activities, leading banks to diversify into new business strategies. This paper examines whether the observed shift…