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Price-mediated contagion occurs when a positive feedback loop develops following a drop in asset prices which forces banks and other financial institutions to sell their holdings. Prior studies of such events fix the level of market…
This study pioneers the application of the Gai-Kapadia framework, originally developed for interbank contagion, to global equity markets. It offers a novel approach to assess systemic risk and default cascades. Using a 20-asset network (13…
This paper develops a dynamic monetary model to study the (in)stability of the fractional reserve banking system. The model shows that the fractional reserve banking system can endanger stability in that equilibrium is more prone to exhibit…
Central banks are actively exploring central bank digital currencies (CBDCs) by conducting research, proofs of concept and pilots. However, adoption of a CBDC can risk fragmenting both payments markets and retail deposits. In this paper, we…
We propose a dynamic model of dependence structure between financial institutions within a financial system and we construct measures for dependence and financial instability. Employing Markov structures of joint credit migrations, our…
The Transmission Control Protocol (TCP) utilizes congestion avoidance and control mechanisms as a preventive measure against congestive collapse and as an adaptive measure in the presence of changing network conditions. The set of available…
We present an analytical model to study the role of expectation feedbacks and overlapping portfolios on systemic stability of financial systems. Building on [Corsi et al., 2016], we model a set of financial institutions having Value at Risk…
Financial contagion from liquidity shocks has being recently ascribed as a prominent driver of systemic risk in interbank lending markets. Building on standard compartment models used in epidemics, in this work we develop an EDB…
This paper presents a unified multi-asset, multi-group asset-flow model that integrates three foundational frameworks from the behavioral finance literature. The model captures the dynamics of financial markets where multiple assets are…
In the context of containment of default contagion in financial networks, we here study a regulator that allocates pre-shock capital or liquidity buffers across banks connected by interbank liabilities and common external asset exposures.…
As the XDC network celebrates five years of stable mainnet operation and prepares for the highly anticipated launch of XDC 2.0, this research proposes a comprehensive improvement plan for the network's staking and tokenomics mechanisms. Our…
Decentralized finance introduces new business models and use cases as part of digital finance. Restaking has recently emerged as a transformative mechanism in DeFi, promising extra yields but introducing complex and interconnected risks.…
In traditional banking, repeated deposit-and-lend cycles let a single dollar of reserves support multiple dollars of claims. Decentralized finance produces an analogous structure with tokens. Constructing a Token Graph of 10,200 tokens…
Modern blockchain ecosystems comprise many heterogeneous networks, creating a growing need for interoperability. Cross-chain bridges provide the core infrastructure for this interoperability by enabling verifiable state transitions that…
Current cryptocurrencies, starting with Bitcoin, build a decentralized blockchain-based transaction ledger, maintained through proofs-of-work that also generate a monetary supply. Such decentralization has benefits, such as independence…
Cross-chain bridges constitute the single largest vector of systemic risk in Decentralized Finance (DeFi), accounting for over \$2.8 billion in losses since 2021. The fundamental vulnerability lies in the binary nature of existing bridge…
We build a balance sheet-based model to capture run risk, i.e., a reduced potential to raise capital from liquidity buffers under stress, driven by depositor scrutiny and further fueled by fire sales in response to withdrawals. The setup is…
Threats on the stability of a financial system may severely affect the functioning of the entire economy, and thus considerable emphasis is placed on the analyzing the cause and effect of such threats. The financial crisis in the current…
We develop a new type of automated market maker (AMM) that helps to maintain stability and long-term viability in a stablecoin. This primary market AMM (P-AMM) is an autonomous mechanism for pricing minting and redemption of stablecoins in…
We study whether liquidity and volatility proxies of a core set of cryptoassets generate spillovers that forecast market-wide risk. Our empirical framework integrates three statistical layers: (A) interactions between core liquidity and…