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Management of systemic risk in financial markets is traditionally associated with setting (higher) capital requirements for market participants. There are indications that while equity ratios have been increased massively since the…
We study an optimal investment problem under contagion risk in a financial model subject to multiple jumps and defaults. The global market information is formulated as a progressive enlargement of a default-free Brownian filtration, and the…
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…
The failure of key financial institutions may accelerate risk contagion due to their interconnections within the system. In this paper, we propose a robust portfolio strategy to mitigate systemic risks during extreme events. We use the…
In this work we will develop a new approach to solve the non repayment problem in microfinance due to the problem of asymmetric information. This approach is based on modeling and simulation of ordinary differential systems where time…
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…
Financial markets are exposed to systemic risk, the risk that a substantial fraction of the system ceases to function and collapses. Systemic risk can propagate through different mechanisms and channels of contagion. One important form of…
Receivable financing is the process whereby cash is advanced to firms against receivables their customers have yet to pay: a receivable can be sold to a funder, which immediately gives the firm cash in return for a small percentage of the…
We test the hypothesis that interconnections across financial institutions can be explained by a diversification motive. This idea stems from the empirical evidence of the existence of long-term exposures that cannot be explained by a…
This paper elaborates about the potential risk of systemic instabilities in future networks and proposes a methodology to mitigate it. The starting concept is modeling the network as a complex environment (e.g. ecosystem) of resources and…
We introduce a probabilistic framework that represents stylized banking networks with the aim of predicting the size of contagion events. Most previous work on random financial networks assumes independent connections between banks, whereas…
Modern network systems, such as transportation and communication systems, are prone to cyber-physical disruptions and thus suffer efficiency loss. This paper studies network resiliency, in terms of throughput, and develops resilient control…
We consider the problem of governing systemic risk in a banking system model. The banking system model consists in an initial value problem for a system of stochastic differential equations whose dependent variables are the log-monetary…
The instability of financial system issues might trigger a bank failure, evoke spillovers, and generate contagion effects which negatively impacted the financial system, ultimately on the economy. This phenomenon is the result of the highly…
Assessing the stability of economic systems is a fundamental research focus in economics, that has become increasingly interdisciplinary in the currently troubled economic situation. In particular, much attention has been devoted to the…
Complex social systems are composed of interconnected individuals whose interactions result in group behaviors. Optimal control of a real-world complex system has many applications, including road traffic management, epidemic prevention,…
We propose a Bayesian nonparametric model including time-varying predictors in dynamic network inference. The model is applied to infer the dependence structure among financial markets during the global financial crisis, estimating effects…
Financial networks help firms manage risk but also enable financial shocks to spread. Despite their importance, existing models of financial networks have several limitations. Prior works often consider a static network with a simple…
We reverse engineer dynamics of financial contagion to find the scenario of smallest exogenous shock that, should it occur, would lead to a given final systemic loss. This reverse stress test can be used to identify the potential triggers…
Over-the-counter markets are at the center of the postcrisis global reform of the financial system. We show how the size and structure of such markets can undergo rapid and extensive changes when participants engage in portfolio…