Related papers: A Risk Mitigation Model of Monetary Ecosystem with…
In this paper, we introduce a novel framework to model the exchange rate dynamics between two intrinsically linked cryptoassets, such as stablecoins pegged to the same fiat currency or a liquid staking token and its associated native token.…
Central Bank Digital Currency (CBDC) is a new form of money, issued by a country's or region's central bank, that can be used for a variety of payment scenarios. Depending on its concrete implementation, there are many participants in a…
The aim of this paper is to quantify and manage systemic risk caused by default contagion in the interbank market. We model the market as a random directed network, where the vertices represent financial institutions and the weighted edges…
A modern version of Monetary Circuit Theory with a particular emphasis on stochastic underpinning mechanisms is developed. It is explained how money is created by the banking system as a whole and by individual banks. The role of central…
We consider a stochastic game between a trader and a central bank in a target zone market with a lower currency peg. This currency peg is maintained by the central bank through the generation of permanent price impact, thereby aggregating…
As impressively shown by the financial crisis in 2007/08, contagion effects in financial networks harbor a great threat for the stability of the entire system. Without sufficient capital requirements for banks and other financial…
Modern economic systems face unprecedented socioeconomic challenges, making systemic resilience and effective liquidity flow management essential. Traditional models such as CAPM, VaR, and GARCH often fail to reflect real market…
Since several years, the fragility of global supply chains (GSCs) is at historically high levels. In the same time, the landscape of hybrid threats is expanding; new forms of hybrid threats create different types of uncertainties. This…
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.…
We outline a token model for Truebit, a retrofitting, blockchain enhancement which enables secure, community-based computation. The model addresses the challenge of stable task pricing, as raised in the Truebit whitepaper, without appealing…
This study extends the Gai-Kapadia framework, originally developed for interbank contagion, to assess systemic risk and default cascades in global equity markets. We analyze a 30 asset network comprising Brazilian and developed market…
Stablecoins are digital assets designed to maintain a stable value, typically pegged to traditional currencies. Despite their growing prominence, many stablecoins have struggled to consistently meet stability expectations, and their…
This study presents contemporaneous modeling of asset return and price range within the framework of stochastic volatility with leverage. A new representation of the probability density function for the price range is provided, and its…
In recent years, it has become apparent that an isolated microprudential approach to capital adequacy requirements of individual institutions is insufficient. It can increase the homogeneity of the financial system and ultimately the cost…
We develop a liquidity-sensitive multivariate volatility framework to improve the estimation of time-varying covariance structures under market frictions. We introduce two novel portfolio-level liquidity measures, liquidity jump and…
In today's global economy, supply chain (SC) entities have become increasingly interconnected with demand and supply relationships due to the need for strategic outsourcing. Such interdependence among firms not only increases efficiency but…
The accelerating digitization of economic activity has made information a dominant driver of market expectations, coordination, and systemic risk. Yet contemporary monetary systems remain anchored in architectures designed for material…
The question of how to stabilize financial systems has attracted considerable attention since the global financial crisis of 2007-2009. Recently, Beale et al. ("Individual versus systemic risk and the regulator's dilemma", Proc Natl Acad…
The fragility of financial systems was starkly demonstrated in early 2023 through a cascade of major bank failures in the United States, including the second, third, and fourth largest collapses in the US history. The highly interdependent…
We propose a model and an estimation technique to distinguish systemic risk and contagion in credit risk. The main idea is to assume, for a set of $d$ obligors, a set of $d$ idiosyncratic shocks and a shock that triggers the default of all…