Related papers: Limit Theorems for Default Contagion and Systemic …
Risks threatening modern societies form an intricately interconnected network that often underlies crisis situations. Yet, little is known about how risk materializations in distinct domains influence each other. Here we present an approach…
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…
This paper provides a framework for modeling financial contagion in a network subject to fire sales and price impacts, but allowing for firms to borrow to cover their shortfall as well. We consider both uncollateralized and collateralized…
This paper considers a model for cascades on random networks in which the cascade propagation at any node depends on the load at the failed neighbor, the degree of the neighbor as well as the load at that node. Each node in the network…
We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale…
After decades of research, cascading blackouts remain one of the unresolved challenges in the bulk power system operations. A new perspective for measuring the susceptibility of the system to cascading failures is clearly needed. The newly…
The network-based model of social contagion has revolved around information on local interactions; its central focus has been on network topological properties shaping the local interactions and, ultimately, social contagion outcomes. We…
This paper provides a general framework for modeling financial contagion in a system with obligations in multiple illiquid assets (e.g., currencies). In so doing, we develop a multi-layered financial network that extends the single network…
A system for Operational Risk management based on the computational paradigm of Bayesian Networks is presented. The algorithm allows the construction of a Bayesian Network targeted for each bank using only internal loss data, and takes into…
The question we address here is of whether phenomena of collective bankruptcies are related to self-organized criticality. In order to answer it we propose a simple model of banking networks based on the random directed percolation. We…
We propose two structural models for stochastic losses given default which allow to model the credit losses of a portfolio of defaultable financial instruments. The credit losses are integrated into a structural model of default events…
We study the system of heterogeneous interbank lending and borrowing based on the relative average of log-capitalization given by the linear combination of the average within groups and the ensemble average and describe the evolution of…
We develop a dynamic point process model of correlated default timing in a portfolio of firms, and analyze typical default profiles in the limit as the size of the pool grows. In our model, a firm defaults at a stochastic intensity that is…
In a network, a local disturbance can propagate and eventually cause a substantial part of the system to fail, in cascade events that are easy to conceptualize but extraordinarily difficult to predict. Here, we develop a statistical…
Internet finance is a new financial model that applies Internet technology to payment, capital borrowing and lending and transaction processing. In order to study the internal risks, this paper uses the Internet financial risk elements as…
We address a fundamental problem that is systematically encountered when modeling complex systems: the limitedness of the information available. In the case of economic and financial networks, privacy issues severely limit the information…
Since the latest financial crisis, the idea of systemic risk has received considerable interest. In particular, contagion effects arising from cross-holdings between interconnected financial firms have been studied extensively. Drawing…
The present paper introduces a structural framework to model dependent defaults, with a particular interest in their contagion.
Social contagion has been studied in various contexts. Many instances of social contagion can be modeled as an infection process where a specific state (adoption of product, fad, knowledge, behavior, etc.) spreads from individual to…
Scheduling control problems for a family of unitary networks under heavy traffic with general interarrival and service times, probabilistic routing and an infinite horizon discounted linear holding cost are studied. Diffusion control…