Related papers: Bailout Stigma
We study the behavior of for-profit institutions that broadcast reputations to foster trust among market participants. We develop a theoretical model in which buyers and sellers are matched on a platform to engage in transactions involving…
Following the financial crisis of 2007-2008, a deep analogy between the origins of instability in financial systems and complex ecosystems has been pointed out: in both cases, topological features of network structures influence how easily…
We study the stability of a discrete-time dynamical mean-field Ising model to perturbations. This model belongs to a broader class of models often used in the study of opinion dynamics in financial markets. In the presence of noise, these…
Rating systems play a vital role in the exponential growth of service-oriented markets. As highly rated online services usually receive substantial revenue in the markets, malicious sellers seek to boost their service evaluation by…
Particularly over the last ten years, Agile has attracted not only the praises of a broad range of enthusiast software developers, but also the criticism of others. Either way, adoption or rejection of Agile seems sometimes to be based more…
Minimizing social bias strengthens societal bonds, promoting shared understanding and better decision-making. We revisit the definition of bias by discovering new bias types (e.g., societal status) in dynamic environments and describe them…
In the General Theory, Keynes remarked that the economy's state depends on expectations, and that these expectations can be subject to sudden swings. In this work, we develop a multiple equilibria behavioural business cycle model that can…
The optimal stopping problem for the risk process with interests rates and when claims are covered immediately is considered. An insurance company receives premiums and pays out claims which have occured according to a renewal process and…
Assessing the stability of economic systems is a fundamental research focus in economics, that has become increasingly interdisciplinary in the currently troubled economic situation. In particular, much attention has been devoted to the…
We model a network economy with three sectors: downstream firms, upstream firms, and banks. Agents are linked by productive and credit relationships so that the behavior of one agent influences the behavior of the others through network…
The credit crisis of 2007 and 2008 has thrown much focus on the models used to price mortgage backed securities. Many institutions have relied heavily on the credit ratings provided by credit agency. The relationships between management of…
When a loan is approved for a person or company, the bank is subject to \emph{credit risk}; the risk that the lender defaults. To mitigate this risk, a bank will require some form of \emph{security}, which will be collected if the lender…
We study soft budget constraints in multi-tier public finance when an upper-tier government uses two instruments: an ex-ante grant schedule and an ex-post rescue. Under convex rescue costs and standard primitives, the three-stage…
Systemic risk in banking systems remains a crucial issue that it has not been completely understood. In our toy model, banks are exposed to two sources of risks, namely, market risk from their investments in assets external to the banking…
We study the problem of asset liquidation in financial systems. During financial crises, asset liquidation is often inevitable but can lead to substantial losses if a significant amount of illiquid assets are sold simultaneously at…
We find that factors explaining bank loan recovery rates vary depending on the state of the economic cycle. Our modeling approach incorporates a two-state Markov switching mechanism as a proxy for the latent credit cycle, helping to explain…
We uncover a close link between outside options and risk attitude: when a decision-maker gains access to an outside option, her behaviour becomes less risk-averse, and conversely, any observed decrease of risk-aversion can be explained by…
I study the optimal regulation of a financial sector where individual banks face self-enforcing constraints countering their default incentives. The constrained-efficient social planner can improve over the unregulated equilibrium in two…
The paper is aware of the importance of certain figures that are essential to an understanding of Credit Scoring models in credit acceptance process optimization, namely if the power of discrimination measured by Gini value is increased by…
It had been believed in the conventional practice that the risk of a bank going bankrupt is lessened in a straightforward manner by transferring the risk of loan defaults. But the failure of American International Group in 2008 posed a more…