Related papers: The Financialization of Proof-of-Stake: Asymptotic…
Economic models with input-output networks assume that firm or sector (unit) growth is driven by a weighted sum of trade partners' growth and an independently-drawn idiosyncratic shock. I show that the idiosyncratic risk assumption in a…
We consider a structural credit model for a large portfolio of credit risky assets where the correlation is due to a market factor. By considering the large portfolio limit of this system we show the existence of a density process for the…
A simple banking network model is proposed which features multiple waves of bank defaults and is analytically solvable in the limiting case of an infinitely large homogeneous network. The model is a collection of nodes representing…
Proof-of-Stake (PoS) blockchain systems, especially those that allow stakeholders to organize themselves in ``stake-pools'', have emerged as a compelling paradigm for the deployment of large scale distributed ledgers. A stake-pool operates…
Credit risk stress testing has become an important risk management device which is used both by banks internally and by regulators. Stress testing is complex because it essentially means projecting a bank's full balance sheet conditional on…
Permissionless Proof-of-Stake (PoS) economic security is predicated on the high cost of violating consensus safety or liveness. We show that liquid staking introduces additional risks that are not captured by standard PoS economic security…
Proof-of-Work (PoW) consensus is traditionally analyzed under the assumption that all miners incur similar costs per unit of computational effort. In reality, costs vary due to factors such as regional electricity cost differences and…
We consider a large random network, in which the performance of a node depends upon that of its neighbours and some external random influence factors. This results in random vector valued fixed-point (FP) equations in large dimensional…
Data regulations increasingly enable consumers to switch among market segments, making segmentation an endogenous outcome of strategic interaction. We study a model in which consumers choose segments before a monopolist sets…
Algorithmic decision-making in high-stakes settings can have profound impacts on individuals and populations. While much prior work studies fairness in static settings, recent results show that enforcing static fairness constraints may…
The recent financial crisis of 2008 and the 2011 indebtedness of Greece highlight the importance of understanding the structure of the global financial network. In this paper we set out to analyze and characterize this network, as captured…
We propose a new model of the liquidity driven banking system focusing on overnight interbank loans. This significant branch of the interbank market is commonly neglected in the banking system modeling and systemic risk analysis. We…
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…
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…
In the proof-of-stake (PoS) paradigm for maintaining decentralized, permissionless cryptocurrencies, Sybil attacks are prevented by basing the distribution of roles in the protocol execution on the stake distribution recorded in the ledger…
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…
The interconnectedness of financial institutions affects instability and credit crises. To quantify systemic risk we introduce here the PD model, a dynamic model that combines credit risk techniques with a contagion mechanism on the network…
How does the monetary and fiscal policy mix alter households' saving incentives? To answer these questions, we build a heterogenous agents New Keynesian model where three different types of agents can save in assets with different liquidity…
Proof of Stake (PoS) blockchains offer promising alternatives to traditional Proof of Work (PoW) systems, providing scalability and energy efficiency. However, blockchains operate in a decentralized manner and the network is composed of…
Decentralized finance (DeFi) borrowing and lending platforms are crucial to the decentralized economy, involving two main participants: lenders who provide assets for interest and borrowers who offer collateral exceeding their debt and pay…