Related papers: Liquidation Efficiency and the Bank-Bond Margin
This paper provides a framework for modeling the financial system with multiple illiquid assets during a crisis. This work generalizes the paper by Amini, Filipovic and Minca (2016) by allowing for differing liquidation strategies. The main…
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…
The money market and the capital market of the Indian financial markets have a symbiotic relationship in the development of the Indian economy. The nature and the characteristics of the markets differ to a large extent as the money market…
Valuing corporate bonds in systemic economies is challenging due to intricate webs of inter-institutional exposures. When a bank defaults, cascading losses propagate through the network, with payments determined by a system of fixed-point…
Since beginning of the 2008 financial crisis almost half a trillion euros have been spent to financially assist EU member states in taxpayer-funded bail-outs. These crisis resolutions are often accompanied by austerity programs causing…
Cash collateral is perfect in that it provides simultaneous counterparty credit risk protection and derivatives funding. Securities are imperfect collateral, because of collateral segregation or differences in CSA haircuts and repo…
We evaluate adversarial robustness in tabular machine learning models used in financial decision making. Using credit scoring and fraud detection data, we apply gradient based attacks and measure impacts on discrimination, calibration, and…
This paper presents a dynamic game framework to analyze the role of large banks in interbank markets. By extending existing models, we incorporate a large bank as a dynamic decision-maker interacting with multiple small banks. Using the…
A simple banking network model is proposed which features multiple waves of bank defaults and is analytically solvable in the limiting case of an infinitely large homogeneous network. The model is a collection of nodes representing…
A financial system is represented by a network, where nodes correspond to banks, and directed labeled edges correspond to debt contracts between banks. Once a payment schedule has been defined, where we assume that a bank cannot refuse a…
This paper studies the bank dynamic decision problem in the intermediate time step for a discrete-time setup. We have considered a three-time-step model. Initially, the banks raise money through debt and equity and invest in different types…
We consider a model of financial contagion in a bipartite network of assets and banks recently introduced in the literature, and we study the effect of power law distributions of degree and balance-sheet size on the stability of the system.…
We analyze the stability of financial investment networks, where financial institutions hold overlapping portfolios of assets. We consider the effect of portfolio diversification and heterogeneous investments using a random matrix dynamical…
Conditional forecasts of risk measures play an important role in internal risk management of financial institutions as well as in regulatory capital calculations. In order to assess forecasting performance of a risk measurement procedure,…
In this paper, we analyze the effect of a policy recommendation on the performance of an artificial interbank market. Financial institutions stipulate lending agreements following a public recommendation and their individual information.…
Securities borrowing and lending are critical to proper functioning of securities markets. To alleviate securities owners' exposure to borrower default risk, overcollateralization and indemnification are provided by the borrower and the…
The trustless nature of permissionless blockchains renders overcollateralization a key safety component relied upon by decentralized finance (DeFi) protocols. Nonetheless, factors such as price volatility may undermine this mechanism. In…
We study the effects of introducing information inefficiency in a model for a random linear economy with a representative consumer. This is done by considering statistical, instead of classical, economic general equilibria. Employing two…
We derive a fundamental trade-off between standard and adversarial risk in a rather general situation that formalizes the following simple intuition: "If no (nearly) optimal predictor is smooth, adversarial robustness comes at the cost of…
In this paper, we extend the optimal securitisation model of Pag\`es [50] and Possama\"i and Pag\`es [51] between an investor and a bank to a setting allowing both moral hazard and adverse selection. Following the recent approach to these…