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Systemic liquidity risk, defined by the IMF as "the risk of simultaneous liquidity difficulties at multiple financial institutions", is a key topic in macroprudential policy and financial stress analysis. Specialized models to simulate…
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…
The recent financial crisis have generated renewed interests in fragilities of global financial networks among economists and regulatory authorities. In particular, a potential vulnerability of the financial networks is the "financial…
This paper investigates whether a financial system can be made more stable if financial institutions share risk by exchanging contingent convertible (CoCo) debt obligations. The question is framed in a financial network model of debt and…
This paper introduces JANUS, a Stablecoin 3.0 protocol designed to address the stablecoin trilemma--simultaneously improving decentralization (D), capital efficiency (E), and safety-stability (S). Building upon insights from previous…
The increasingly complex economic and financial environment in which we live makes the management of liquidity in payment systems and the economy in general a persistent challenge. New technologies are making it possible to address this…
Stablecoins have historically depegged due from par to large sales, possibly of speculative nature, or poor reserve asset quality. Using a global game which addresses both concerns, we show that the selling pressure on stablecoin holders…
We consider a liquidity provider's (LP's) exposure to stablecoin and liquid staking derivative (LSD) depegs on Curve's StableSwap pools. We construct a suite of metrics designed to detect potential asset depegs based on price and trading…
The rise of Decentralized Finance ("DeFi") on the Ethereum blockchain has enabled the creation of lending platforms, which serve as marketplaces to lend and borrow digital currencies. We first categorize the activity of lending platforms…
The `Black Thursday' crisis in cryptocurrency markets demonstrated deleveraging risks in over-collateralized non-custodial stablecoins. We develop a stochastic model that helps explain deleveraging crises in these over-collateralized…
In this paper, we explore the short- and long-term stability of backed stablecoins offering constant mint and redeem prices to all agents. We refer to such designs as price window-based, since the mint and redeem prices constrain the…
Stablecoins, which are primarily intended to function as a global reserve of value are insubstantial in their design and present many failure points. The primary mechanism to enable these coins to hold on to a fixed value is by backing them…
The blockchain paradigm provides a mechanism for content dissemination and distributed consensus on Peer-to-Peer (P2P) networks. While this paradigm has been widely adopted in industry, it has not been carefully analyzed in terms of its…
Blockchain technology has completely revolutionized the field of decentralized finance with the emergence of a variety of cryptocurrencies and digital assets. However, widespread adoption of this technology by governments and enterprises…
The current crisis, at the time of writing, has had a profound impact on the financial world, introducing the need for creative approaches to revitalising the economy at the micro level as well as the macro level. In this informal analysis…
A theoretical model of systemic-risk propagation of financial market is analyzed for stability. The state equation is an unsteady diffusion equation with a nonlinear logistic growth term, where the diffusion process captures the spread of…
Decentralized finance (DeFi) lacks centralized oversight, often resulting in heightened volatility. In contrast, centralized finance (CeFi) offers a more stable environment with institutional safeguards. Institutional backing can play a…
Evaluation of systemic risk in networks of financial institutions in general requires information of inter-institution financial exposures. In the framework of Debt Rank algorithm, we introduce an approximate method of systemic risk…
The cryptocurrency market is volatile, non-stationary and non-continuous. Together with liquid derivatives markets, this poses a unique opportunity to study risk management, especially the hedging of options, in a turbulent market. We study…
Global illicit fund flows exceed an estimated $3.1 trillion annually, with stablecoins emerging as a preferred laundering medium due to their liquidity. While decentralized protocols increasingly adopt zero-knowledge proofs to obfuscate…