Related papers: Vault as a credit instrument
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…
A common problem in risk analysis is to characterize the overall security of a system of valuable assets (e.g., government buildings or communication hubs), and to suggest measures to mitigate any hazards or security threats. Currently,…
The risk of financial positions is measured by the minimum amount of capital to raise and invest in eligible portfolios of traded assets in order to meet a prescribed acceptability constraint. We investigate nondegeneracy, finiteness and…
This paper presents a convenient framework for modeling default process and pricing derivative securities involving credit risk. The framework provides an integrated view of credit valuation adjustment by linking distance-to-default,…
The risk of a credit portfolio depends crucially on correlations between the probability of default (PD) in different economic sectors. Often, PD correlations have to be estimated from relatively short time series of default rates, and the…
We introduce a decentralised, algorithmic framework for permissionless, multi-strategy capital allocation via tokenised, automated vaults. The system is designed to function analogously to a multi-strategy asset management company, but…
This paper reviews the economic and theoretical foundations of insolvency risk measurement and capital adequacy rules. The proposed new measure of insolvency risk is constructed by disentangling assets, debt and equity at the…
Software defects rediscovered by a large number of customers affect various stakeholders and may: 1) hint at gaps in a software manufacturer's Quality Assurance (QA) processes, 2) lead to an over-load of a software manufacturer's support…
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.…
Credit networks rely on decentralized, pairwise trust relationships (channels) to exchange money or goods. Credit networks arise naturally in many financial systems, including the recent construct of payment channel networks in blockchain…
Quantifying structural stress in transaction networks requires metrics that capture structural organization beyond transaction volume alone. In this work, we introduce the Inefficiency Metric, a deterministic indicator designed to…
We propose a unified structural credit risk model incorporating both insolvency and illiquidity risks, in order to investigate how a firm's default probability depends on the liquidity risk associated with its financing structure. We assume…
DeFi, or Decentralized Finance, is based on a distributed ledger called blockchain technology. Using blockchain, DeFi may customize the execution of predetermined operations between parties. The DeFi system use blockchain technology to…
We present two methodologies on the estimation of rating transition probabilities within Markov and non-Markov frameworks. We first estimate a continuous-time Markov chain using discrete (missing) data and derive a simpler expression for…
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…
In the aftermath of the financial crisis, the growing literature on financial networks has widely documented the predictive power of topological characteristics (e.g. degree centrality measures) to explain the systemic impact or systemic…
The 2008 financial crisis illustrated the need for a thorough, functional understanding of systemic risk in strongly interconnected financial structures. Dynamic processes on complex networks being intrinsically difficult, most recent…
We consider a general tractable model for default contagion and systemic risk in a heterogeneous financial network, subject to an exogenous macroeconomic shock. We show that, under some regularity assumptions, the default cascade model…
Decentralized Finance (DeFi) is a new financial industry built on blockchain technologies. Decentralized financial services have consequently increased the ability to lend, borrow, and invest in decentralized investment vehicles, allowing…
Deploying machine learning in regulated financial environments -- credit risk, fraud detection, and anti-money laundering -- exposes critical vulnerabilities in algorithmic reproducibility. While early financial ML addressed statistical…