Related papers: Suffocating Fire Sales
In financial markets, greater volatility is usually considered synonym of greater risk and instability. However, large market downturns and upturns are often preceded by long periods where price returns exhibit only small fluctuations. To…
We analyze cascades of defaults in an interbank loan market. The novel feature of this study is that the network structure and the size distribution of banks are derived from empirical data. We find that the ability of a defaulted…
We develop a stochastic macro-financial model in continuous time by integrating two specifications of the Keen economic framework with a financial market driven by a jump-diffusion process. The economic block of the model combines monetary…
The increasing integration of world economies, which organize in complex multilayer networks of interactions, is one of the critical factors for the global propagation of economic crises. We adopt the network science approach to quantify…
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…
The increasing frequency of extreme weather events poses significant risks to power distribution systems, leading to widespread outages and severe economic and social consequences. This paper presents a novel simulation framework for…
Financial networks are dynamic. To assess their systemic importance to the world-wide economic network and avert losses we need models that take the time variations of the links and nodes into account. Using the methodology of classical…
Supply chain disruptions constitute an often underestimated risk for financial stability. As in financial networks, systemic risks in production networks arises when the local failure of one firm impacts the production of others and might…
We introduce and analyze several variants of a system of differential equations which model the dynamics of social outbursts, such as riots. The systems involve the coupling of an explicit variable representing the intensity of rioting…
Solomon and Golo [1] have recently proposed an autocatalytic (self-reinforcing) feedback model which couples a macroscopic system parameter (the interest rate), a microscopic parameter that measures the distribution of the states of the…
Financial markets are a typical example of complex systems where interactions between constituents lead to many remarkable features. Here, we show that a pairwise maximum entropy model (or auto-logistic model) is able to describe switches…
This paper presents a new interacting particle system and uses it as a spin model for financial market microstructure. The asymptotic analysis of this stochastic process exhibits a lower bound to the contemporaneous measurement of price and…
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…
An explanation for the political processes leading to the sudden collapse of empires and states would be useful for understanding both historical and contemporary political events. We seek a general description of state collapse spanning…
Stablecoins have historically depegged due from par to large sales, possibly of speculative nature, or poor reserve asset quality. Using a global game which addresses both concerns, we show that the selling pressure on stablecoin holders…
The paper proposes a framework for modeling and analysis of the dynamics of supply, demand, and clearing prices in power system with real-time retail pricing and information asymmetry. Real-time retail pricing is characterized by passing on…
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…
We propose a dynamic model of dependence structure between financial institutions within a financial system and we construct measures for dependence and financial instability. Employing Markov structures of joint credit migrations, our…
In diffusion auctions, sellers can leverage an underlying social network to broaden participation, thereby increasing their potential revenue. Specifically, sellers can incentivise participants in their auction to diffuse information about…
We study the dynamics of correlation and variance in systems under the load of environmental factors. A universal effect in ensembles of similar systems under the load of similar factors is described: in crisis, typically, even before…