Related papers: Phase transitions in debt recycling
Modelling systems with networks has been a powerful approach to tame the complexity of several phenomena. Unfortunately, such an approach is often made difficult by the large number of variables to take into consideration. Methods of…
We design a system for risk-analyzing and pricing portfolios of non-performing consumer credit loans. The rapid development of credit lending business for consumers heightens the need for trading portfolios formed by overdue loans as a…
A debt swap is an elementary edge swap in a directed, weighted graph, where two edges with the same weight swap their targets. Debt swaps are a natural and appealing operation in financial networks, in which nodes are banks and edges…
We consider a random financial network with a large number of agents. The agents connect through credit instruments borrowed from each other or through direct lending, and these create the liabilities. The settlement of the debts of various…
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…
Sustaining efficiency and stability by properly controlling the equity to asset ratio is one of the most important and difficult challenges in bank management. Due to unexpected and abrupt decline of asset values, a bank must closely…
We demonstrate the application of an algorithmic trading strategy based upon the recently developed dynamic mode decomposition (DMD) on portfolios of financial data. The method is capable of characterizing complex dynamical systems, in this…
Recurrent boom-and-bust cycles are a salient feature of economic and financial history. Cycles found in the data are stochastic, often highly persistent, and span substantial fractions of the sample size. We refer to such cycles as "long".…
In recent decades, companies have frequently adopted share repurchase programs to return capital to shareholders or for other strategic purposes, instructing investment banks to rapidly buy back shares on their behalf. When the executing…
Mortgage default prediction is a core task in financial risk management, and machine learning models are increasingly used to estimate default probabilities and provide interpretable signals for downstream decisions. In real-world mortgage…
A macroeconomic model based on the economic variables (i) assets, (ii) leverage (defined as debt over asset) and (iii) trust (defined as the maximum sustainable leverage) is proposed to investigate the role of credit in the dynamics of…
To achieve climate neutrality, synergies between circular economy and reduction of greenhouse gas emissions must be strengthened. Previously idle emission reduction potentials of resource efficiency are to be exploited. Since all…
A model is developed to assess the profitability of loans or mortgages with a specified repayment schedule. Financial institutions face two competing risks: default and prepayment, both influenced by the stochastic evolution of credit…
There is empirical evidence that recovery rates tend to go down just when the number of defaults goes up in economic downturns. This has to be taken into account in estimation of the capital against credit risk required by Basel II to cover…
The writers propose a mathematical Method for deriving risk weights which describe how a borrower's income, relative to their debt service obligations (serviceability) affects the probability of default of the loan. The Method considers the…
I develop a tractable adverse-selection model comparing secured bank loans and bonds when both pledge collateral but differ in effective liquidation efficiency. A small wedge in recovery rates generates coexistence, a sharp bank-bond…
This paper presents an analysis of technical debt management through resources allocation policies in software maintenance process during its operation to demonstrate how different strategies leads to the emergence of different behaviors…
We study the dual model with capital injection under the additional condition that the dividend strategy is absolutely continuous. We consider a refraction-reflection strategy that pays dividends at the maximal rate whenever the surplus is…
We present a limits-to-arbitrage model to study the impact of securitization, leverage and credit risk protection on the cyclicity of bank credit. In a stable bank credit situation, no cycles of credit expansion or contraction appear.…
Survival analysis has become a standard approach for modelling time to default by time-varying covariates in credit risk. Unlike most existing methods that implicitly assume a stationary data-generating process, in practise, mortgage…