Related papers: A Case for AXI
This paper examines recovery of the wall-shear stress of a turbulent boundary layer that has undergone a sudden transition from a rough to a smooth surface. Early works of Antonia and Luxton questioned the reliability of standard…
We reverse engineer dynamics of financial contagion to find the scenario of smallest exogenous shock that, should it occur, would lead to a given final systemic loss. This reverse stress test can be used to identify the potential triggers…
It had been believed in the conventional practice that the risk of a bank going bankrupt is lessened in a straightforward manner by transferring the risk of loan defaults. But the failure of American International Group in 2008 posed a more…
A new financial instrument (a new kind of a loan) is introduced. The loan-stock instrument (LSI) combines fixed rate instruments (loans, etc.) with other financial instruments that have higher volatilities and returns (stocks, mutual funds,…
Realistic credit risk assessment, the estimation of losses from counterparty's failure, is central for the financial stability. Credit risk models focus on the financial conditions of borrowers and only marginally consider other risks from…
We investigated publicly reported security breaches of internal controls in corporate systems to determine whether SOX assessments are information bearing with respect to breaches which can lead to materially significant losses and…
As a forward-looking measure of future equity market volatility, the VIX index has gained immense popularity in recent years to become a key measure of risk for market analysts and academics. We consider discrete reported intraday VIX tick…
We investigate the impact of available information on the estimation of the default probability within a generalized structural model for credit risk. The traditional structural model where default is triggered when the value of the firm's…
A growing trend in modern data analysis is the integration of data management with learning, guided by accuracy, latency, and cost requirements. In practice, applications draw data of different formats from many sources. In the meanwhile,…
Artificial intelligence is creating one of the biggest revolution across technology driven application fields. For the finance sector, it offers many opportunities for significant market innovation and yet broad adoption of AI systems…
Big Data has become central to modern applications in finance, insurance, and cybersecurity, enabling machine learning systems to perform large-scale risk assessments and fraud detection. However, the increasing dependence on automated…
We study dynamic visual representations as a proxy for investor sentiment about the stock market. Our sentiment index, GIFsentiment, is constructed from millions of posts in the Graphics Interchange Format (GIF) on a leading investment…
Credit and liquidity risks represent main channels of financial contagion for interbank lending markets. On one hand, banks face potential losses whenever their counterparties are under distress and thus unable to fulfill their obligations.…
This paper examines the integration of AI's carbon footprint into the risk management frameworks (RMFs) of the banking sector, emphasising its importance in aligning with sustainability goals and regulatory requirements. As AI becomes…
This study investigates how financial market structure reorganizes during the COVID-19 crash using a conditional p-threshold mutual information (MI) based Minimum Spanning Tree (MST) framework. We analyze nonlinear dependencies among the…
We study historical correlations and lead-lag relationships between individual stock risk (volatility of daily stock returns) and market risk (volatility of daily returns of a market-representative portfolio) in the US stock market. We…
We extend the Vasi\v{c}ek loan portfolio model to a setting where liabilities fluctuate randomly and asset values may be subject to systemic jump risk. We derive the probability distribution of the percentage loss of a uniform portfolio and…
The complexity of financial markets arise from the strategic interactions among agents trading stocks, which manifest in the form of vibrant correlation patterns among stock prices. Over the past few decades, complex financial markets have…
This study investigates the short-term asymptotic behavior of the implied volatility surface (IVS), with a particular focus on the at-the-money (ATM) skew and curvature, which are key determinants of the IVS shape and whose are widely…
We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump--diffusion process for the risk factors, i.e. for the company assets. We also include correlations…