Related papers: Basel II for Physicists: A Discussion Paper
The question of how to stabilize financial systems has attracted considerable attention since the global financial crisis of 2007-2009. Recently, Beale et al. ("Individual versus systemic risk and the regulator's dilemma", Proc Natl Acad…
Recurring international financial crises have adverse socioeconomic effects and demand novel regulatory instruments or strategies for risk management and market stabilization. However, the complex web of market interactions often impedes…
Credit estimation and bankruptcy prediction methods have been utilizing Altman's $z$ score method for the last several years. It is reported in many studies that $z$ score is sensitive to changes in accounting figures. Researches have…
This paper discusses the IAU Resolutions B1.3, B1.4, B1.5 and B1.9 (2000) that were adopted during the 24th General Assembly in Manchester, 2000 and provides details and explanations for these Resolutions. It is explained why they present…
As demonstrated during the recent financial crisis, regulators require additional analytical tools to assess systemic risk in the financial sector. This paper describes one such tool; namely a novel market modeling and analysis capability.…
In recent years, it has become apparent that an isolated microprudential approach to capital adequacy requirements of individual institutions is insufficient. It can increase the homogeneity of the financial system and ultimately the cost…
Stablecoins, with a capitalization exceeding 200 billion USD as of January 2025, have shown significant growth, with annual transaction volumes exceeding 10 trillion dollars in 2023 and nearly doubling that figure in 2024. This exceptional…
This research presents a comprehensive framework for transitioning financial diffusion models from the risk-neutral (RN) measure to the real-world (RW) measure, leveraging results from probability theory, specifically Girsanov's theorem.…
Dynamical systems, that are used to model power grids, the brain, and other physical systems, can exhibit coexisting stable states known as attractors. A powerful tool to understand such systems, as well as to better predict when they may…
This study conducts a bibliometric review of scientific literature on the European Union Emissions Trading System (EU ETS) from 2004 to 2024, using research articles from the Scopus database. Using the Bibliometrix R package, we analyze…
One 'problem' with the 21st century world, particularly the economic and business worlds, is the phenomenal and increasing number of interconnections between economic agents (consumers, firms, banks, markets, national economies). This…
This paper introduces a novel approach to financial crisis prediction by establishing a thermodynamic-like framework derived from the fluctuation theorem of statistical physics. We define market temperature through the probability ratio of…
In the context of containment of default contagion in financial networks, we here study a regulator that allocates pre-shock capital or liquidity buffers across banks connected by interbank liabilities and common external asset exposures.…
The document discusses the financial climate risk in the context of the banking industry, emphasizing the need for a comprehensive understanding of climate change across different spatial and temporal scales. It highlights the challenges in…
Sustainability is a key point for financial markets and the label "Green" is an attempt to address this. Acquisition of the label "Green" for financial products carries potential benefits, hence the controversy and attractiveness of the…
We develop the first basic Operational Risk perspective on key risk management issues associated with the development of new forms of electronic currency in the real economy. In particular, we focus on understanding the development of new…
This study investigates the factors that influence the capital adequacy of commercial banks in Bangladesh using panel data from 28 banks over the period of 2013-2019. Three analytical methods, including the Fixed Effect model, Random Effect…
This paper studies the response of stock markets relative to the banking sector to innovation by using a panel of 75 countries from 1982 to 2021. We find that innovation increases the activity, efficiency and size of stock markets relative…
Alignment of financial market incentives and carbon emissions disincentives is key to limiting global warming. Regulators and standards bodies have made a start by requiring some carbon-related disclosures and proposing others. Here we go…
We investigate a multi-factor extension of the asymptotic single risk factor (ASRF) model that underlies the capital charges of the "Basel II Accord". In this extended model, it is still possible to derive closed-form solutions for the risk…