Related papers: A Case for AXI
Artificial intelligence (AI) enables machines to learn from human experience, adjust to new inputs, and perform human-like tasks. AI is progressing rapidly and is transforming the way businesses operate, from process automation to cognitive…
In this empirical paper we show that in the months following a crash there is a distinct connection between the fall of stock prices and the increase in the range of interest rates for a sample of bonds. This variable, which is often…
Water consumption is an increasingly critical dimension of computing sustainability, especially as AI workloads rapidly scale. However, current water impact assessment often overlooks where and when water stress is more severe. To fill in…
Interbank markets are often characterised in terms of a core-periphery network structure, with a highly interconnected core of banks holding the market together, and a periphery of banks connected mostly to the core but not internally. This…
Credit Scoring is one of the problems banks and financial institutions have to solve on a daily basis. If the state-of-the-art research in Machine and Deep Learning for finance has reached interesting results about Credit Scoring models,…
According to theoretical models of valuing risky corporate securities, risk of default is primary component in overall yield spread. However, sizable empirical literature considers it otherwise by giving more importance to non-default risk…
Common asset holdings are widely believed to have been the primary vector of contagion in the recent financial crisis. We develop a network approach to the amplification of financial contagion due to the combination of overlapping…
Interbank lending and borrowing occur when financial institutions seek to settle and refinance their mutual positions over time and circumstances. This interactive process involves money creation at the aggregate level. Coordination…
It is well known that the Cox-Ingersoll-Ross (CIR) stochastic model to study the term structure of interest rates, as introduced in 1985, is inadequate for modelling the current market environment with negative short interest rates.…
We propose a new framework for measuring connectedness among financial variables that arises due to heterogeneous frequency responses to shocks. To estimate connectedness in short-, medium-, and long-term financial cycles, we introduce a…
Complex AI systems make better predictions but often lack transparency, limiting trustworthiness, interpretability, and safe deployment. Common post hoc AI explainers, such as LIME, SHAP, HSIC, and SAGE, are model agnostic but are too…
Systemic risk refers to the overall vulnerability arising from the high degree of interconnectedness and interdependence within the financial system. In the rapidly developing decentralized finance (DeFi) ecosystem, numerous studies have…
The Robust Effect Size Index (RESI) is a recently proposed standardized effect size to quantify association strength across models. However, its confidence interval construction has relied on computationally intensive bootstrap procedures.…
Credit risk stress testing has become an important risk management device which is used both by banks internally and by regulators. Stress testing is complex because it essentially means projecting a bank's full balance sheet conditional on…
Decentralized Finance (DeFi), a financial ecosystem without centralized controlling organization, has introduced a new paradigm for lending and borrowing. However, its capital efficiency remains constrained by the inability to effectively…
I construct a Market Stress Probability Index (MSPI) that estimates the probability of high stress in the U.S. equity market one month ahead using information from the cross-section of individual stocks. Using CRSP daily data, each month is…
In this paper we analyze the resilience of a network of banks to joint price fluctuations of the external assets in which they have shared exposures, and evaluate the worst-case effects of the possible default contagion. Indeed, when the…
The stability of a complex financial system may be assessed by measuring risk contagion between various financial institutions with relatively high exposure. We consider a financial network model using a bipartite graph of financial…
This paper investigates the dynamic interactions between large-scale data centers and the power grid, focusing on reliability challenges arising from sudden fluctuations in demand. With the rapid growth of AI-driven workloads, such…
Forecasting corporate financial distress increasingly requires capturing firms' adoption of transformative technologies such as artificial intelligence, yet model performance remains vulnerable to temporal distribution shifts as these…