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We present a model of worldwide crisis contagion based on the Google matrix analysis of the world trade network obtained from the UN Comtrade database. The fraction of bankrupted countries exhibits an \textit{on-off} phase transition…
The spread of ideas across a social network can be studied using complex contagion models, in which agents are activated by contact with multiple activated neighbors. The investigation of complex contagions can provide crucial insights into…
As corporates and governments become more digital, they become vulnerable to various forms of cyber attack. Cyber insurance products have been used as risk management tools, yet their pricing does not reflect actual risk, including that of…
The European sovereign debt crisis has impaired many European banks. The distress on the European banks may transmit worldwide, and result in a large-scale knock-on default of financial institutions. This study presents a computer…
Financial contagion from liquidity shocks has being recently ascribed as a prominent driver of systemic risk in interbank lending markets. Building on standard compartment models used in epidemics, in this work we develop an EDB…
We study simultaneous price drops of real stocks and show that for high drop thresholds they follow a power-law distribution. To reproduce these collective downturns, we propose a minimal self-organized model of cascade spreading based on a…
We study multiple defaults where the global market information is modelled as progressive enlargement of filtrations. We shall provide a general pricing formula by establishing a relationship between the enlarged filtration and the…
Exploring measures to improve financial networks and mitigate systemic risks is an ongoing challenge. We study claims trading, a notion defined in Chapter 11 of the U.S. Bankruptcy Code. For a bank $v$ in distress and a trading partner $w$,…
Various social, financial, biological and technological systems can be modeled by interdependent networks. It has been assumed that in order to remain functional, nodes in one network must receive the support from nodes belonging to…
Cascading failure is a potentially devastating process that spreads on real-world complex networks and can impact the integrity of wide-ranging infrastructures, natural systems, and societal cohesiveness. One of the essential features that…
Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk…
We study hedging and pricing of unattainable contingent claims in a non-Markovian regime-switching financial model. Our financial market consists of a bank account and a risky asset whose dynamics are driven by a Brownian motion and a…
We have conducted an agent-based simulation of chain bankruptcy. The propagation of credit risk on a network, i.e., chain bankruptcy, is the key to nderstanding largesized bankruptcies. In our model, decrease of revenue by the loss of…
Derivative hedging and pricing are important and continuously studied topics in financial markets. Recently, deep hedging has been proposed as a promising approach that uses deep learning to approximate the optimal hedging strategy and can…
In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…
We propose a Markov jump process with the three-state herding interaction. We see our approach as an agent-based model for the financial markets. Under certain assumptions this agent-based model can be related to the stochastic description…
Infectious diseases are practically represented by models with multiple states and complex transition rules corresponding to, for example, birth, death, infection, recovery, disease progression, and quarantine. In addition, networks…
We study an open problem of risk-sensitive portfolio allocation in a regime-switching credit market with default contagion. The state space of the Markovian regime-switching process is assumed to be a countably infinite set. To characterize…
Stochastic processes can model many emerging phenomena on networks, like the spread of computer viruses, rumors, or infectious diseases. Understanding the dynamics of such stochastic spreading processes is therefore of fundamental interest.…
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…