Related papers: Vault as a credit instrument
Digital banking and online communication have made modern bank runs faster and more networked than the canonical queue-at-the-branch setting. While equilibrium models explain why strategic complementarities generate run risk, they offer…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…
Advances in large language models have enabled agentic AI systems that can reason, plan, and interact with external tools to execute multi-step workflows, while public blockchains have evolved into a programmable substrate for value…
Decentralization has been touted as the principal security advantage which propelled blockchain systems at the forefront of developments in the financial technology space. Its exact semantics nevertheless remain highly contested and…
For credit risk management purposes in general, and for allocation of regulatory capital by banks in particular (Basel II), numerical assessments of the credit-worthiness of borrowers are indispensable. These assessments are expressed in…
Payment channels networks drastically increase the throughput and hence scalability of blockchains by performing transactions \emph{off-chain}. In an off-chain payment, parties deposit coins in a channel and then perform transactions…
Mortgage default prediction is a core task in financial risk management, and machine learning models are increasingly used to estimate default probabilities and provide interpretable signals for downstream decisions. In real-world mortgage…
Cross-chain interoperability is a core component of modern blockchain infrastructure, enabling seamless asset transfers and composable applications across multiple blockchain ecosystems. However, the transparency of cross-chain messages can…
In domains like automotive, safety-critical features are increasingly realized by software. Some features might even require fail-operational behavior, so that they must be provided even in the presence of random hardware failures. A new…
This paper addresses the issue of blockchain protocol risks, a foundational category of risks affecting Distributed Ledger Technology (DLT) which underpins digital assets, smart contracts, and decentralised applications. It presents a…
As AI systems integrate into critical infrastructure, security gaps in AI compliance frameworks demand urgent attention. This paper audits and quantifies security risks in three major AI governance standards: NIST AI RMF 1.0, UK's AI and…
Scoring the creditworthiness of accounts that interact with decentralized financial (DeFi) protocols remains an important yet unsolved problem. In this paper, we propose a credit scoring system for those accounts that have interacted with…
The use of CVA to cover credit risk is widely spread, but has its limitations. Namely, dealers face the problem of the illiquidity of instruments used for hedging it, hence forced to warehouse credit risk. As a result, dealers tend to offer…
Decentralized finance (DeFi) has become one of the most successful applications of blockchain and smart contracts. The DeFi ecosystem enables a wide range of crypto-financial activities, while the underlying smart contracts often contain…
Regulatory requirements dictate that financial institutions must calculate risk capital (funds that must be retained to cover future losses) at least annually. Procedures for doing this have been well-established for many years, but recent…
The relationship between set-valued risk measures for processes and vectors on the optional filtration is investigated. The equivalence of risk measures for processes and vectors and the equivalence of their penalty function formulations…
The exponential growth of Common Vulnerabilities and Exposures (CVE) disclosures poses significant challenges for enterprise security management, necessitating automated and quantitative risk assessment methodologies. Existing vulnerability…
The modeling of the probability of joint default or total number of defaults among the firms is one of the crucial problems to mitigate the credit risk since the default correlations significantly affect the portfolio loss distribution and…
This theoretical model contains concept, equations, and graphical results for venture banking. A system of 27 equations describes the behavior of the venture-bank and underwriter system allowing phase-space type graphs that show where…
Decentralized applications are often composed of multiple interconnected smart contracts. This is especially evident in DeFi, where protocols are heavily intertwined and rely on a variety of basic building blocks such as tokens,…