Related papers: Estimation of inter-sector asset correlations
The instability of the financial system as experienced in recent years and in previous periods is often linked to credit defaults, i.e., to the failure of obligors to make promised payments. Given the large number of credit contracts, this…
Stock market returns are typically analyzed using standard regression, yet they reside on irregular domains which is a natural scenario for graph signal processing. To this end, we consider a market graph as an intuitive way to represent…
The global financial system can be represented as a large complex network in which banks, hedge funds and other financial institutions are interconnected to each other through visible and invisible financial linkages. Recently, a lot of…
This study delves into the intricate realm of risk evaluation within the domain of specific financial derivatives, notably options. Unlike other financial instruments, like bonds, options are susceptible to broader risks. A distinctive…
We aim to cluster financial assets in order to identify a small set of stocks to approximate the level of diversification of the whole universe of stocks. We develop a data-driven approach to clustering based on a correlation blockmodel in…
This paper characterises dynamic linkages arising from shocks with heterogeneous degrees of persistence. Using frequency domain techniques, we introduce measures that identify smoothly varying links of a transitory and persistent nature.…
Causal discovery is the subfield of causal inference concerned with estimating the structure of cause-and-effect relationships in a system of interrelated variables, as opposed to quantifying the strength or describing the form of causal…
Approach-level models were developed to accommodate the diversity of approaches within the same intersection. A random effect term, which indicates the intersection-specific effect, was incorporated into each crash type model to deal with…
We obtain an explicit formula for the bilateral counterparty valuation adjustment of a credit default swaps portfolio referencing an asymptotically large number of entities. We perform the analysis under a doubly stochastic intensity…
This paper examines the possibility of using derivative-implied risk premia to explain stock returns. The rapid development of derivative markets has led to the possibility of trading various kinds of risks, such as credit and interest rate…
We review the state of the art of clustering financial time series and the study of their correlations alongside other interaction networks. The aim of this review is to gather in one place the relevant material from different fields, e.g.…
We compare two models of corporate default by calculating the Jeffreys-Kullback-Leibler divergence between their predicted default probabilities when asset correlations are either high or low. Our main results show that the divergence…
Recently, there has been a growing interest in network research, especially in these fields of biology, computer science, and sociology. It is natural to address complex financial issues such as the European sovereign debt crisis from the…
The vast majority of market impact studies assess each product individually, and the interactions between the different order flows are disregarded. This strong approximation may lead to an underestimation of trading costs and possible…
We explore credit risk pricing by modeling equity as a call option and debt as the difference between the firm's asset value and a put option, following the structural framework of the Merton model. Our approach proceeds in two stages:…
We construct a price impact model between stocks in a correlated market. For the price change of a given stock induced by the short-run liquidity of this stock itself and of the information about other stocks, we introduce a self- and a…
In the field of road safety, it is common to use responsibility analyses to assess the effect of a given factor on the risk of being responsible for an accident, among drivers involved in an accident only. Even if this design is now widely…
Relational arrays represent measures of association between pairs of actors, often in varied contexts or over time. Trade flows between countries, financial transactions between individuals, contact frequencies between school children in…
A simple spin system is constructed to simulate dynamics of asset prices and studied numerically. The outcome for the distribution of prices is shown to depend both on the dimension of the system and the introduction of price into the link…
A method to estimate the time-dependent correlation via an empirical bias estimate of the time-delayed mutual information for a time-series is proposed. In particular, the bias of the time-delayed mutual information is shown to often be…