A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
Study combines intra-risk and contagion risk for SME bankruptcy prediction.
New method detects currency contagion sources using causal inference.
This paper examines how the U.S.--China trade war affects stock markets, finding evidence of financial contagion and changes in risk channels.
Measures risk contagion in financial networks using CoVaR.
Study quantifies financial contagion risks in supply chains.
iConViz helps banks manage default contagion risk in networked loans.
Systemic risks of default contagion in the Russian interbank market are investigated. The analysis is based on considering the bow-tie structure of the weighted oriented graph describing the structure of the interbank loans. A probabilistic model of interbank contagion explicitly taking into account the empirical bow-t…
This paper develops a new framework to assess crypto portfolio risk using simulation methods.
This research develops a new model for cyber risk and insurance pricing.
It had been believed in the conventional practice that the risk of a bank going bankrupt is lessened in a straightforward manner by transferring the risk of loan defaults. But the failure of American International Group in 2008 posed a more complex aspect of financial contagion. This study presents an extension of the …
Causal-NECO VaR improves financial risk assessment under market turbulence.
This paper uses MIS to identify key financial institutions with minimal risk contagion.
In spite of the growing theoretical literature on cascades of failures in interbank lending networks, empirical results seem to suggest that networks of direct exposures are not the major channel of financial contagion. In this paper we show that networks of interbank exposures can however significantly amplify contagi…
Model assesses how supply chain disruptions affect financial stability.
Systemic liquidity risk, defined by the IMF as "the risk of simultaneous liquidity difficulties at multiple financial institutions", is a key topic in macroprudential policy and financial stress analysis. Specialized models to simulate funding liquidity risk and contagion are available but they require not only banks' …
We study multiple defaults where the global market information is modelled as progressive enlargement of filtrations. We shall provide a general pricing formula by establishing a relationship between the enlarged filtration and the reference default-free filtration in the random measure framework. On each default scena…
This paper optimizes cybersecurity resource allocation in networks with heterogeneous attacker and defender valuations.
We discuss the systemic risk implied by the interbank exposures reconstructed with the maximum entropy method. The maximum entropy method severely underestimates the risk of interbank contagion by assuming a fully connected network, while in reality the structure of the interbank network is sparsely connected. Here, we…
The importance of adequately modeling credit risk has once again been highlighted in the recent financial crisis. Defaults tend to cluster around times of economic stress due to poor macro-economic conditions, {\em but also} by directly triggering each other through contagion. Although credit default swaps have radical…
Financial markets are exposed to systemic risk, the risk that a substantial fraction of the system ceases to function and collapses. Systemic risk can propagate through different mechanisms and channels of contagion. One important form of financial contagion arises from indirect interconnections between financial insti…
Model shows how banks' fears of future defaults can cause immediate financial stress.
This paper models financial contagion with endogenously determined market liquidity.
Modelling of contagion in interbank networks is discussed. A model taking into account bow-tie structure and dissasortativity of interbank networks is developed. The model is shown to provide a good quantitative description of the Russian interbank market. Detailed arguments favoring the non-percolative nature of conta…
As impressively shown by the financial crisis in 2007/08, contagion effects in financial networks harbor a great threat for the stability of the entire system. Without sufficient capital requirements for banks and other financial institutions, shocks that are locally confined at first can spread through the entire syst…
The paper validates a centrality measure for financial networks during financial distress.
I show the equivalence between a model of financial contagion and the threshold model of global cascades proposed by Watts (2002). The model financial network comprises banks that hold risky external assets as well as interbank assets. It is shown that a simple threshold model can replicate the size and the frequency o…
Risk contagion concerns any entity dealing with large scale risks. Suppose (X,Y) denotes a risk vector pertaining to two components in some system. A relevant measurement of risk contagion would be to quantify the amount of influence of high values of Y on X. This can be measured in a variety of ways. In this paper, we…
Modeling default contagion and systemic risk using a balls-and-bins approach.
We propose a model and an estimation technique to distinguish systemic risk and contagion in credit risk. The main idea is to assume, for a set of obligors, a set of idiosyncratic shocks and a shock that triggers the default of all them. All shocks are assumed to be linked by a dependence relationship, that in …
Study examines financial contagion at community level, finding increased contagion density and widespread transmission.
The theory of multilayer networks is in its early stages, and its development provides vital methods for understanding complex systems. Multilayer networks, in their multiplex form, have been introduced within the last three years to analysing the structure of financial systems, and existing studies have modelled and e…
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 defaulted obligors in the group. We obtain analytic characterizations for the d…
The global crisis of 2008 provoked a heightened interest among scientists to study the phenomenon, its propagation and negative consequences. The process of modelling the spread of a virus is commonly used in epidemiology. Conceptually, the spread of a disease among a population is similar to the contagion process in e…
Multiplex Network Hawkes model for systemic risk measurement
This study presents an ANWSER model (asset network systemic risk model) to quantify the risk of financial contagion which manifests itself in a financial crisis. The transmission of financial distress is governed by a heterogeneous bank credit network and an investment portfolio of banks. Bankruptcy reproductive ratio …
This paper uses graph neural networks to predict SME default risk using transaction and ownership networks.
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 of exposures among banks. A potential loss distribution is obtained through a m…
In this work we introduce a model of default contagion that combines the approaches of Eisenberg-Noe interbank networks and dynamic mean field interactions. The proposed contagion mechanism provides an endogenous rule for early defaults in a network of financial institutions. The main result is to demonstrate a mean fi…
Paper introduces a new model for cyber insurance pricing.
We contribute to the understanding of how systemic risk arises in a network of credit-interlinked agents. Motivated by empirical studies we formulate a network model which, despite its simplicity, depicts the nature of interbank markets better than a homogeneous model. The components of a vector Ornstein-Uhlenbeck proc…
Complex contagion model explains financial fire sales through continuous asset prices.
Paper examines risk measure expansions under FGM dependence, improving accuracy at extreme levels.
The paper models default probabilities and total defaults in credit portfolios using a contagion process with self-exciting jumps.
The classical reduced-form and filtration expansion framework in credit risk is extended to the case of multiple, non-ordered defaults, assuming that conditional densities of the default times exist. Intensities and pricing formulas are derived, revealing how information driven default contagion arises in these models.…
Systemic risks characterizing the Russian overnight interbank market from the network point of view are analyzed.
The paper models systemic risk in European and U.S. banks using factor copulas.
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 interaction of different models and their pricing impact. Specifically, we model…
This paper develops the Jungle model in a credit portfolio framework. The Jungle model is able to model credit contagion, produce doubly-peaked probability distributions for the total default loss and endogenously generate quasi phase transitions, potentially leading to systemic credit events which happen unexpectedly …