Related papers: A Case for AXI
In this work we consider three problems of the standard market approach to pricing of credit index options: the definition of the index spread is not valid in general, the usually considered payoff leads to a pricing which is not always…
We determine how MRI-turbulent stresses depend on gas pressure via a suite of unstratified shearing box simulations. Earlier numerical work reported only a very weak dependence at best, results that call into question the canonical…
Financial literacy is increasingly dependent on the ability to interpret complex financial data and utilize advanced forecasting tools. In this context, this study proposes a novel approach that combines transformer-based time series models…
This paper introduces a heterogeneous macroeconomic model of a Proof-of-Stake (PoS) network to analyze the long-term centralizing effects of external traditional finance (TradFi) yields. We model a continuum of rational actors divided into…
Based on an empirical analysis of the network structure of the Austrian inter-bank market, we study the flow of funds through the banking network following exogenous shocks to the system. These shocks are implemented by stochastic changes…
Ensuring safety in autonomous driving requires precise, real-time risk assessment and adaptive behavior. Prior work on risk estimation either outputs coarse, global scene-level metrics lacking interpretability, proposes indicators without…
The modeling of the probability of joint default or total number of defaults among the firms is one of the crucial problems to mitigate the credit risk since the default correlations significantly affect the portfolio loss distribution and…
We introduce a multiple curve framework that combines tractable dynamics and semi-analytic pricing formulas with positive interest rates and basis spreads. Negatives rates and positive spreads can also be accommodated in this framework. The…
Explainable Artificial Intelligence (XAI) is increasingly required in computational economics, where machine-learning forecasters can outperform classical econometric models but remain difficult to audit and use for policy. This survey…
Assessing the resilience of the economy requires accounting for its intrinsic multi-layer nature, by assessing for instance how disruptions at the firm level spread through the production network and propagate to the banking sector. Methods…
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…
We propose a unified structural credit risk model incorporating both insolvency and illiquidity risks, in order to investigate how a firm's default probability depends on the liquidity risk associated with its financing structure. We assume…
In this paper, we employ Credit Default Swaps (CDS) to model the joint and conditional distress probabilities of banks in Europe and the U.S. using factor copulas. We propose multi-factor, structured factor, and factor-vine models where the…
Banking system crises are complex events that in a short span of time can inflict extensive damage to banks themselves and to the external economy. The crisis literature has so far identified a number of distinct effects or channels that…
There are non-vanishing price responses across different stocks in correlated financial markets. We further study this issue by performing different averages, which identify active and passive cross-responses. The two average…
The DebtRank algorithm has been increasingly investigated as a method to estimate the impact of shocks in financial networks, as it overcomes the limitations of the traditional default-cascade approaches. Here we formulate a dynamical…
U.S. financial institutions deploying AI-based fraud detection face a fragmented compliance landscape spanning four regulatory frameworks -- OCC Bulletin 2011-12, SR 11-7, the CFPB AI circular, and FinCEN BSA/SAR requirements -- with no…
United States (US) IG bonds typically trade at modest spreads over US Treasuries, reflecting the credit risk tied to a corporation's default potential. During market crises, IG spreads often widen and liquidity tends to decrease, likely due…
We develop a model for the dynamic evolution of default-free and defaultable interest rates in a LIBOR framework. Utilizing the class of affine processes, this model produces positive LIBOR rates and spreads, while the dynamics are…
Artificial Intelligence (AI) is rapidly expanding and integrating more into daily life to automate tasks, guide decision making, and enhance efficiency. However, complex AI models, which make decisions without providing clear explanations…