Related papers: Evaluation of Tranche in Securitization and Long-r…
We consider a large collection of dynamically interacting components defined on a weighted directed graph determining the impact of default of one component to another one. We prove a law of large numbers for the empirical measure capturing…
Nested stochastic modeling has been on the rise in many fields of the financial industry. Such modeling arises whenever certain components of a stochastic model are stochastically determined by other models. There are at least two main…
We perform a numerical study of the long range (LR) ferromagnetic Ising model with power law decaying interactions ($J \propto r^{-d-\sigma}$) both on a one-dimensional chain ($d=1$) and on a square lattice ($d=2$). We use advanced cluster…
We study the effect of long-range connections on the infinite-randomness fixed point associated with the quantum phase transitions in a transverse Ising model (TIM). The TIM resides on a long-range connected lattice where any two sites at a…
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…
We study optimal investment in an asset subject to risk of default for investors that rely on different levels of information. The price dynamics can include noises both from a Wiener process and a Poisson random measure with infinite…
Feature selection is a critical component in predictive analytics that significantly affects the prediction accuracy and interpretability of models. Intrinsic methods for feature selection are built directly into model learning, providing a…
Inspired by the recent literature on aggregation theory, we aim at relating the long range correlation of the stocks return volatility to the heterogeneity of the investors' expectations about the level of the future volatility. Based on a…
In this article, we study the problem of pricing defaultable bond with discrete default intensity and barrier under constant risk free short rate using higher order binary options and their integrals. In our credit risk model, the risk free…
We establish a high-dimensional statistical learning framework for individualized asset allocation. Our proposed methodology addresses continuous-action decision-making with a large number of characteristics. We develop a discretization…
We study the configurations of the nearest neighbor Ising ferromagnetic chain with IID centered and square integrable external random field in the limit in which the pairwise interaction tends to infinity. The available free energy…
We present a tractable non-independent increment process which provides a high modeling flexibility. The process lies on an extension of the so-called Harris chains to continuous time being stationary and Feller. We exhibit constructions,…
This systemic risk paper introduces inhomogeneous random financial networks (IRFNs). Such models are intended to describe parts, or the entirety, of a highly heterogeneous network of banks and their interconnections, in the global financial…
Charge correlations in dense ionic fluids give rise to novel effects such as long-range screening and colloidal stabilization which are not predicted by the classic Debye-Huckel theory. We show that a Coulomb or charge-frustrated Ising…
In this paper we propose a copula contagion mixture model for correlated default times. The model includes the well known factor, copula, and contagion models as its special cases. The key advantage of such a model is that we can study the…
We develop a dynamic point process model of correlated default timing in a portfolio of firms, and analyze typical default profiles in the limit as the size of the pool grows. In our model, a firm defaults at a stochastic intensity that is…
We study the approximation of certain stochastic integrals with respect to a d-dimensional diffusion by corresponding stochastic integrals with piece-wise constant integrands. In finance this corresponds to replacing a continuously adjusted…
This note discusses some of the aspects of a model for the covariance of equity returns based on a simple "isotropic" structure in which all pairwise correlations are taken to be the same value. The effect of the structure on feasible…
Prepayment risk embedded in fixed-rate mortgages forms a significant fraction of a financial institution's exposure, and it receives particular attention because of the magnitude of the underlying market. The embedded prepayment option…
We study numerically the entanglement entropy and spatial correlations of the one dimensional transverse field Ising model with three different perturbations. First, we focus on the out of equilibrium, steady state with an energy current…