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In this paper we consider a mean-field model of interacting diffusions for the monetary reserves in which the reserves are subjected to a self- and cross-exciting shock. This is motivated by the financial acceleration and fire sales…
Cross-chain swaps enable exchange of different assets that reside on different blockchains. Several protocols have been proposed for atomic cross-chain swaps. However, those protocols are not fault-tolerant, in the sense that if any party…
Since the introduction of Bitcoin in 2008, many other cryptocurrencies have been introduced and gained popularity. Lack of interoperability and scalability amongst these cryptocurrencies was and still is, acting as a significant impediment…
In this paper we develop a tractable structural model with analytical default probabilities depending on some dynamics parameters, and we show how to calibrate the model using a chosen number of Credit Default Swap (CDS) market quotes. We…
Network theory proved recently to be useful in the quantification of many properties of financial systems. The analysis of the structure of investment portfolios is a major application since their eventual correlation and overlap impact the…
Recent studies from social, biological, and engineering network systems have drawn attention to the dynamics over signed networks, where each link is associated with a positive/negative sign indicating trustful/mistrustful,…
This paper introduces a novel multi-moment connectedness network approach for analyzing the interconnectedness of green financial market. Focusing on the impact of monetary policy shocks, our study reveals that connectedness within the…
Operational risk is the risk relative to monetary losses caused by failures of bank internal processes due to heterogeneous causes. A dynamical model including both spontaneous generation of losses and generation via interactions between…
We study how network structure affects the dynamics of collateral in presence of rehypothecation. We build a simple model wherein banks interact via chains of repo contracts and use their proprietary collateral or re-use the collateral…
This paper studies the valuation of a class of default swaps with the embedded option to switch to a different premium and notional principal anytime prior to a credit event. These are early exercisable contracts that give the protection…
We present a multilayer network model for credit risk assessment. Our model accounts for multiple connections between borrowers (such as their geographic location and their economic activity) and allows for explicitly modelling the…
Price-mediated contagion occurs when a positive feedback loop develops following a drop in asset prices which forces banks and other financial institutions to sell their holdings. Prior studies of such events fix the level of market…
Foreign exchange and credit derivatives increase the bank's contributions to systemic risk. Interest rate derivatives decrease it. The proportion of non-performing loans over total loans and the leverage ratio have stronger impact on…
In considering a social network, there are cases where people is transferred to another place. Then the physical (direct) relations among nodes are lost by the movement. In terms of a network theory, some nodes break the present connections…
This paper studies how shocks to global banks' net worth transmit to Emerging Market Economies. Using the identification strategy of Ottonello and Song (2022), which isolates high-frequency surprises to banks' credit supply capacity, we…
In a money exchange process involving a seller and a buyer, we develop a straightforward model encompassing conservative, non-conservative, and systems with or without debt. Our model integrates the Fermi function to capture the behavior of…
We explore a model of the interaction between banks and outside investors in which the ability of banks to issue inside money (short-term liabilities believed to be convertible into currency at par) can generate a collapse in asset prices…
We propose a new framework for measuring connectedness among financial variables that arises due to heterogeneous frequency responses to shocks. To estimate connectedness in short-, medium-, and long-term financial cycles, we introduce a…
Exchange of resources among individual components of a system is fundamental to systems like a social network of humans and a network of cities and villages. For various reasons, the human society has come up with the notion of money as a…
A novel network-based approach is introduced to analyze banking systems, focusing on two main themes: identifying influential nodes within global banking networks using Bank for International Settlements data and developing an algorithm to…