Related papers: Vault as a credit instrument
Risk management is an important practice in the banking industry. In this paper we develop a new methodology to estimate and predict the probability of default (PD) based on the rating transition matrices, which relates the rating…
Decentralized Finance (DeFi) refers to financial services that are not necessarily related to crypto-currencies. By employing blockchain for security and integrity, DeFi creates new possibilities that attract retail and institution users,…
The trustless nature of permissionless blockchains renders overcollateralization a key safety component relied upon by decentralized finance (DeFi) protocols. Nonetheless, factors such as price volatility may undermine this mechanism. In…
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…
Decentralized Finance (DeFi) is a prominent application of smart contracts, representing a novel financial paradigm in contrast to centralized finance. While DeFi applications are rapidly emerging on mainstream blockchain platforms, their…
Financial speculators often seek to increase their potential gains with leverage. Debt is a popular form of leverage, and with over 39.88B USD of total value locked (TVL), the Decentralized Finance (DeFi) lending markets are thriving.…
Decentralized Finance (DeFi) is emerging as a peer-to-peer financial ecosystem, enabling participants to trade products on a permissionless blockchain. Built on blockchain and smart contracts, the DeFi ecosystem has experienced explosive…
Selective Classification, wherein models can reject low-confidence predictions, promises reliable translation of machine-learning based classification systems to real-world scenarios such as clinical diagnostics. While current evaluation of…
Existing benchmarks measure capability -- whether a model succeeds on a single attempt -- but production deployments require reliability -- consistent success across repeated attempts on tasks of varying duration. We show these properties…
We introduce a novel class of systemic risk measures, the Vulnerability Conditional risk measures, which try to capture the "tail risk" of a risky position in scenarios where one or more market participants is experiencing financial…
Credit risk management, the practice of mitigating losses by understanding the adequacy of a borrower's capital and loan loss reserves, has long been imperative to any financial institution's long-term sustainability and growth. MassMutual…
Decentralized finance (DeFi) markets spread across Layer-1 (L1) and Layer-2 (L2) blockchains rely on arbitrage to keep prices aligned. Today most price gaps are closed against centralized exchanges (CEXes), whose deep liquidity and fast…
We develop a unified model in which AI adoption in financial markets generates systemic risk through three mutually reinforcing channels: performative prediction, algorithmic herding, and cognitive dependency. Within an extended rational…
We propose a novel credit default model that takes into account the impact of macroeconomic information and contagion effect on the defaults of obligors. We use a set-valued Markov chain to model the default process, which is the set of all…
Decentralised Finance (DeFi) applications constitute an entire financial ecosystem deployed on blockchains. Such applications are based on complex protocols and incentive mechanisms whose financial safety is hard to determine. Besides,…
In this paper, we study properties of certain risk measures associated with acceptance sets. These sets describe regulatory preconditions that have to be fulfilled by financial institutions to pass a given acceptance test. If the financial…
The writers propose a mathematical Method for deriving risk weights which describe how a borrower's income, relative to their debt service obligations (serviceability) affects the probability of default of the loan. The Method considers the…
This paper investigates systemic risk transmission across stablecoin markets using Quantile Vector Autoregression (QVAR). Analyzing eight major stablecoins with day data coverage from 2021 to 2025, supplemented by minute-level event studies…
With the advent of decentralised digital currencies powered by blockchain technology, a new era of peer-to-peer transactions has commenced. The rapid growth of the cryptocurrency economy has led to increased use of transaction-enabling…
Smart contracts are the cornerstone of decentralized applications and financial protocols, which extend the application of digital currency transactions. The applications and financial protocols introduce significant security challenges,…