Related papers: Dynamic Default Contagion in Heterogeneous Interba…
Common asset holdings are widely believed to have been the primary vector of contagion in the recent financial crisis. We develop a network approach to the amplification of financial contagion due to the combination of overlapping…
This paper develops a continuous functional framework for analyzing contagion dynamics in financial networks, extending the Navier-Stokes-based approach to network-structured spatial processes. We model financial distress propagation as a…
This paper proposes a simple technical approach for the analytical derivation of Point-in-Time PD (probability of default) forecasts, with minimal data requirements. The inputs required are the current and future Through-the-Cycle PDs of…
When banks choose similar investment strategies the financial system becomes vulnerable to common shocks. We model a simple financial system in which banks decide about their investment strategy based on a private belief about the state of…
Continuous-time Bayesian networks is a natural structured representation language for multicomponent stochastic processes that evolve continuously over time. Despite the compact representation, inference in such models is intractable even…
We consider a mean-variance portfolio selection problem in a financial market with contagion risk. The risky assets follow a jump-diffusion model, in which jumps are driven by a multivariate Hawkes process with mutual-excitation effect. The…
The Susceptible-Infected-Susceptible model is a canonical model for emerging disease outbreaks. Such outbreaks are naturally modeled as taking place on networks. A theoretical challenge in network epidemiology is the dynamic correlations…
This paper aims to systematically solve stochastic team optimization of large-scale system, in a rather general framework. Concretely, the underlying large-scale system involves considerable weakly-coupled cooperative agents for which the…
The dynamics of ecological as well as chemical systems may depend on heterogeneous configurations. Heterogeneity in reaction-diffusion systems often increase modelling and simulating difficulties when non-linear effects are present. One…
Power system operators need tools for rapid, real-time counterfactual assessments of grid security under fast-changing conditions. Traditional N-1 contingency analysis lacks dynamic evaluation, especially of frequency swings from common…
The present paper is devoted to the study of a bank salvage model with finite time horizon and subjected to stochastic impulse controls. In our model, the bank's default time is a completely inaccessible random quantity generating its own…
Many immunization strategies have been proposed to prevent infectious viruses from spreading through a network. In this study, we propose efficient immunization strategies to prevent a default contagion that might occur in a financial…
This paper develops a two-dimensional structural framework for valuing credit default swaps and corporate bonds in the presence of default contagion. Modelling the values of related firms as correlated geometric Brownian motions with…
In this contribution, a variational diffuse modeling framework for cracks in heterogeneous media is presented. A static order parameter smoothly bridges the discontinuity at material interfaces, while an evolving phase-field captures the…
We typically interact in groups, not just in pairs. For this reason, it has recently been proposed that the spread of information, opinion or disease should be modelled over a hypergraph rather than a standard graph. The use of hyperedges…
Motivated by the detection of cascades of defaults in economy, we developed a detection framework for an endogenous spreading based on causal motifs we define in this paper. We assume that the change of state of a vertex can be triggered by…
The dynamic behaviour of stochastic spreading processes on a network model based on k-regular graphs is investigated. The contact process and the susceptible-infected-susceptible model for the spread of epidemics are considered as prototype…
Evaluation of default correlation is an important task in credit risk analysis. In many practical situations, it concerns the joint defaults of several correlated firms, the task that is reducible to a first passage time (FPT) problem. This…
We investigate systems of interacting stochastic differential equations with two kinds of heterogeneity: one originating from different weights of the linkages, and one concerning their asymptotic relevance when the system becomes large. To…
We introduce a general model for the balance-sheet consistent valuation of interbank claims within an interconnected financial system. Our model represents an extension of clearing models of interdependent liabilities to account for the…