Related papers: Vault as a credit instrument
Decentralized Finance (DeFi), a financial ecosystem without centralized controlling organization, has introduced a new paradigm for lending and borrowing. However, its capital efficiency remains constrained by the inability to effectively…
Decentralized finance (DeFi) protocols now intermediate over USD 100 billion in value, including regulated stablecoins and tokenized assets deployed as collateral, yet no widely adopted framework operationalizes risk assessment at the rigor…
This paper maps the emerging market for decentralized credit in which ERC 4626 vaults and third-party curators, rather than monolithic lending protocols alone, increasingly determine underwriting and leverage decisions. We show that modular…
This work explores the formation and propagation of systemic risks across traditional finance (TradFi) and decentralized finance (DeFi), offering a comparative framework that bridges these two increasingly interconnected ecosystems. We…
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…
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…
Systemic risk refers to the overall vulnerability arising from the high degree of interconnectedness and interdependence within the financial system. In the rapidly developing decentralized finance (DeFi) ecosystem, numerous studies have…
Financial markets are undergoing an unprecedented transformation. Technological advances have brought major improvements to the operations of financial services. While these advances promote improved accessibility and convenience,…
On-chain lending has expanded across multiple distributed ledgers as DeFi becomes increasingly multi-chain. This environment introduces novel technical and financial mechanisms, particularly cross-blockchain communication and asset transfer…
Analytical, free of time consuming Monte Carlo simulations, framework for credit portfolio systematic risk metrics calculations is presented. Techniques are described that allow calculation of portfolio-level systematic risk measures…
Lending protocols are one of the main applications of Decentralized Finance (DeFi), enabling crypto-assets loan markets with a total value estimated in the tens of billions of dollars. Unlike traditional lending systems, these protocols…
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…
Much research in systemic risk is focused on default contagion. While this demands an understanding of valuation, fewer articles specifically deal with the existence, the uniqueness, and the computation of equilibrium prices in structural…
Credit exposure in Decentralized Finance (DeFi) is often implicit and token-mediated, creating a dense web of inter-protocol dependencies. Thus, a shock to one token may result in significant and uncontrolled contagion effects. As the DeFi…
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…
This work explores the characteristics of financial contagion in networks whose links distributions approaches a power law, using a model that defines banks balance sheets from information of network connectivity. By varying the parameters…
Analytical, free of time consuming Monte Carlo simulations, framework for credit portfolio systematic risk metrics calculations is presented. Techniques are described that allow calculation of portfolio-level systematic risk measures…
Blockchain-based decentralised lending is a rapidly growing and evolving alternative to traditional lending, but it poses new risks. To mitigate these risks, lending protocols have integrated automated risk management tools into their smart…
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…
With the development of decentralized finance (DeFi), lending protocols have been increasingly proposed in the market. A comprehensive and in-depth evaluation of lending protocol is essential to the DeFi market participants. Due to the…