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Backtesting risk measures is a central task in financial regulation. While standard backtests evaluate whether a forecasting model is statistically consistent with observed losses, regulatory practice often requires assessing the…
Monitoring means to observe a system for any changes which may occur over time, using a monitor or measuring device of some sort. In this paper we formulate a problem of monitoring dates of maximal risk of a financial position. Thus, the…
The expansion of global production networks has raised many important questions about the interdependence among countries and how future changes in the world economy are likely to affect the countries' positioning in global value chains. We…
The networked nature of supply chains makes them susceptible to systemic risk, where local firm failures can propagate through firm interdependencies that can lead to cascading supply chain disruptions. The systemic risk of supply chains…
By treating the financial market as a thermodynamic system, we establish a one-to-one correspondence between thermodynamic variables and economic quantities. Measured by the expected loss under the worst-case scenario, financial risk caused…
We address the problem that classical risk measures may not detect the tail risk adequately. This can occur for instance due to averaging when calculating the Expected Shortfall. The current literature proposes the so-called adjusted…
Different approaches to defining dynamic market risk measures are available in the literature. Most are focused or derived from probability theory, economic behavior or dynamic programming. Here, we propose an approach to define and…
In this research, starting from a widely accepted definition of risk, we support the idea that risk reduction is a more realistic objective than risk minimization, which represents a theoretical utopia. Furthermore, significant risk…
Eisenberg and Noe (2001) analyze systemic risk for financial institutions linked by a network of liabilities. They show that the solution to their model is unique when the financial system is satisfies a regularity condition involving risk…
We empirically test the effects of unanticipated fiscal policy shocks on the growth rate and the cyclical component of real private output and reveal different types of asymmetries in fiscal policy implementation. The data used are…
A well-interpretable measure of information has been recently proposed based on a partition obtained by intersecting a random sequence with its moving average. The partition yields disjoint sets of the sequence, which are then ranked…
Financial crises are a recurrent phenomenon with important effects on the real economy. The financial system is inherently fragile and it is therefore of great importance to be able to measure and characterize its systemic stability.…
In this paper we introduce a generalization of classical risk measures in which the risk is represented by a step function taking two values, corresponding to two endogenously determined market regimes. This extends the traditional…
Stealth attacks pose potential risks to cyber-physical systems because they are difficult to detect. Assessing the risk of systems under stealth attacks remains an open challenge, especially in nonlinear systems. To comprehensively quantify…
Failure statistics of banks in the US show that their sizes are highly unequal (ranging from a few tens of thousands to over a billion dollars) and also, they come in `waves' of intermittent activities. This motivates a self-organized…
We address the statistical estimation of composite functionals which may be nonlinear in the probability measure. Our study is motivated by the need to estimate coherent measures of risk, which become increasingly popular in finance,…
How, and to what extent, does an interconnected financial system endogenously amplify external shocks? This paper attempts to reconcile some apparently different views emerged after the 2008 crisis regarding the nature and the relevance of…
We study the emergence of instabilities in a stylized model of a financial market, when different market actors calculate prices according to different (local) market measures. We derive typical properties for ensembles of large random…
In this article, we address the problem of risk assessment of stealthy attacks on uncertain control systems. Considering data injection attacks that aim at maximizing impact while remaining undetected, we use the recently proposed…
The existence of asymmetric information has always been a major concern for financial institutions. Financial intermediaries such as commercial banks need to study the quality of potential borrowers in order to make their decision on…