Related papers: Can Nash inform capital requirements? Allocating s…
The financial crisis has dramatically demonstrated that the traditional approach to apply univariate monetary risk measures to single institutions does not capture sufficiently the perilous systemic risk that is generated by the…
Systemic risk refers to the risk that the financial system is susceptible to failures due to the characteristics of the system itself. The tremendous cost of systemic risk requires the design and implementation of tools for the efficient…
The financial crisis showed the importance of measuring, allocating and regulating systemic risk. Recently, the systemic risk measures that can be decomposed into an aggregation function and a scalar measure of risk, received a lot of…
Capital allocation principles are used in various contexts in which a risk capital or a cost of an aggregate position has to be allocated among its constituent parts. We study capital allocation principles in a performance measurement…
We propose a simple model of inter-bank borrowing and lending where the evolution of the log-monetary reserves of $N$ banks is described by a system of diffusion processes coupled through their drifts in such a way that stability of the…
Systemic risk measures were introduced to capture the global risk and the corresponding contagion effects that is generated by an interconnected system of financial institutions. To this purpose, two approaches were suggested. In the first…
We analyze the systemic risk for disjoint and overlapping groups (e.g., central clearing counterparties (CCP)) by proposing new models with realistic game features. Specifically, we generalize the systemic risk measure proposed in [F.…
We define and study a lending game to model the interbank money market, in which lending banks strategically allocate their cash to borrowing banks. The interest rate offered by each borrowing bank is within the interest rate corridor set…
In this study, we present models where participants strategically select their risk levels and earn corresponding rewards, mirroring real-world competition across various sectors. Our analysis starts with a normal form game involving two…
The game-theoretic risk management framework put forth in the precursor reports "Towards a Theory of Games with Payoffs that are Probability-Distributions" (arXiv:1506.07368 [q-fin.EC]) and "Algorithms to Compute Nash-Equilibria in Games…
In recent years, it has become apparent that an isolated microprudential approach to capital adequacy requirements of individual institutions is insufficient. It can increase the homogeneity of the financial system and ultimately the cost…
The game-theoretic risk management framework put forth in the precursor work "Towards a Theory of Games with Payoffs that are Probability-Distributions" (arXiv:1506.07368 [q-fin.EC]) is herein extended by algorithmic details on how to…
We propose a type of non-cooperative game, termed multi-cluster aggregative game, which is composed of clusters as players, where each cluster consists of collaborative agents with cost functions depending on their own decisions and the…
We study the system of heterogeneous interbank lending and borrowing based on the relative average of log-capitalization given by the linear combination of the average within groups and the ensemble average and describe the evolution of…
Examining the behavior of multi-agent systems is vitally important to many emerging distributed applications - game theory has emerged as a powerful tool set in which to do so. The main approach of game-theoretic techniques is to model…
The decisions that human beings make to allocate time has significant bearing on economic output and to the sustenance of social networks. The time allocation problem motivates our formal analysis of the resource allocation game, where…
The negative externalities from an individual bank failure to the whole system can be huge. One of the key purposes of bank regulation is to internalize the social costs of potential bank failures via capital charges. This study proposes a…
The standard risk minimization paradigm of machine learning is brittle when operating in environments whose test distributions are different from the training distribution due to spurious correlations. Training on data from many…
Motivated by the complex dynamics of cooperative and competitive interactions within networked agent systems, multi-cluster games provide a framework for modeling the interconnected goals of self-interested clusters of agents. For this…
Evaluation of systemic risk in networks of financial institutions in general requires information of inter-institution financial exposures. In the framework of Debt Rank algorithm, we introduce an approximate method of systemic risk…