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In normal times, it is assumed that financial institutions operating in non-overlapping sectors have complementary and distinct outcomes, typically reflected in mostly uncorrelated outcomes and asset returns. Such is the reasoning behind…
Addressing both natural and societal challenges requires collective cooperation. Studies on collective-risk social dilemmas have shown that individual decisions are influenced by the perceived risk of collective failure. However, existing…
Empirical evidence reveals that contagion processes often occur with competition of simple and complex contagion, meaning that while some agents follow simple contagion, others follow complex contagion. Simple contagion refers to spreading…
The process of infection of a host is complex, influenced by factors such as microbial variation within and between hosts as well as differences in dose across hosts. This study uses dose-response and within-host microbial infection models…
We propose two structural models for stochastic losses given default which allow to model the credit losses of a portfolio of defaultable financial instruments. The credit losses are integrated into a structural model of default events…
We propose a new model of the liquidity driven banking system focusing on overnight interbank loans. This significant branch of the interbank market is commonly neglected in the banking system modeling and systemic risk analysis. We…
We develop a dynamic point process model of correlated default timing in a portfolio of firms, and analyze typical default profiles in the limit as the size of the pool grows. In our model, a firm defaults at a stochastic intensity that is…
We introduce a heterogeneous formulation of a contagious McKean-Vlasov system, whose inherent heterogeneity comes from asymmetric interactions with a natural and highly tractable structure. It is shown that this formulation characterises…
We propose an interacting particle system to model the evolution of a system of banks with mutual exposures. In this model, a bank defaults when its normalized asset value hits a lower threshold, and its default causes instantaneous losses…
As global financial markets become increasingly interconnected, financial contagion has developed into a major influencer of asset price dynamics. Motivated by this context, our study explores financial contagion both within and between…
In this paper, we performs a credit risk analysis, on the data of past loan applicants of a company named Lending Club. The calculation required the use of exploratory data analysis and machine learning classification algorithms, namely,…
A standard quantitative method to access credit risk employs a factor model based on joint multivariate normal distribution properties. By extending a one-factor Gaussian copula model to make a more accurate default forecast, this paper…
This paper investigates the finite horizon risk-sensitive portfolio optimization in a regime-switching credit market with physical and information-induced default contagion. It is assumed that the underlying regime-switching process has…
We study a family of binary state, socially-inspired contagion models which incorporate imitation limited by an aversion to complete conformity. We uncover rich behavior in our models whether operating with either probabilistic or…
Individual risk models need to capture possible correlations as failing to do so typically results in an underestimation of extreme quantiles of the aggregate loss. Such dependence modelling is particularly important for managing credit…
Current epidemics in the biological and social domains are challenging the standard assumptions of mathematical contagion models. Chief among them are the complex patterns of transmission caused by heterogeneous group sizes and infection…
Solomon and Golo [1] have recently proposed an autocatalytic (self-reinforcing) feedback model which couples a macroscopic system parameter (the interest rate), a microscopic parameter that measures the distribution of the states of the…
In spite of the growing theoretical literature on cascades of failures in interbank lending networks, empirical results seem to suggest that networks of direct exposures are not the major channel of financial contagion. In this paper we…
Bayesian hierarchical models are a methodology for aggregation and synthesis of data from heterogeneous settings, used widely in statistics and other disciplines. I apply this framework to the evidence from 7 randomized experiments of…
In this paper, we propose a dynamical model to capture cascading failures among interconnected organizations in the global financial system. Failures can take the form of bankruptcies, defaults, and other insolvencies. The network that…