We study cross-country GDP losses due to financial crises in terms of frequency (number of loss events per period) and severity (loss per occurrence). We perform the Loss Distribution Approach (LDA) to estimate a multi-country aggregate GDP loss probability density function and the percentiles associated to extreme eve…
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48 results for “Financial Crises”
An exploration of the mathematical structure and behavioural biases of 21st century financial crisesq-fin.ST
Study financial crises using mathematical techniques to compare equity performance.
problem Comparing financial crises to understand market dynamics and investor strategies.
method New mathematical techniques including portfolio diversification, linear operator method, and combinatorial portfolio optimisation.
result New methods to quantify and compare equity returns during different market crises.
Study evaluates cryptocurrency markets, focusing on Bitcoin.
problem Evaluating financial markets, especially during crises.
method Multiple-bubble testing approach.
result Identifies Bitcoin's multiple bubbles during economic periods.
TailCoRq-fin.ST
TailCoR measures co-movement of financial crises events.
problem Measuring co-movement of financial crises events.
method Combines linear and non-linear dependencies using tail inter quantile range.
result TailCoR performs well in small samples and no optimisations are needed.
Financial heat machinecond-mat.other
We consider dynamics of financial markets as dynamics of expectations and discuss such a dynamics from the point of view of phenomenological thermodynamics. We describe a financial Carnot cycle and the financial analogue of a heat machine. We see, that while in physics a perpetuum mobile is absolutely impossible, in ec…
News attention to financial intermediaries and crises predicts excess bond premium and macroeconomic movements.
problem Drivers of the excess bond premium (EBP).
method News attention to 180 topics captures up to 80% of EBP variation and forecasts macroeconomic movements.
result News attention to financial intermediaries and crises drives up the EBP and predicts macroeconomic downturns.
Various works have already showed that common shocks and cross-country financial linkages caused the banking systems of several countries to be highly interconnected with the result that during bad times, banking crises may arise simultaneously in different countries. Our aim is to provide further evidence on the topic…
Modeling financial crises and cryptocurrency shocks using copulae clustering.
problem Detecting financial crises and shock events in stock and cryptocurrency markets.
method Copulae clustering based on probability distribution distances.
result Successfully detected all past crises and shock events in stock and cryptocurrency markets.
New method identifies precursors of financial crises in market correlation structures.
problem Predicting long-term financial crises in non-Markovian, non-stationary markets.
method Identifying quasi-stationary market states and their precursor properties.
result Certain features of market states show potential as indicators of financial crises.
Study on Leverage Ratio in European banks during financial crises.
problem Impact of financial crises on European banks' Leverage Ratio.
method Empirical analysis using regression techniques.
result Leverage Ratio is significantly influenced by financial scenarios.
SRR detects early signs of financial crises using multi-layer graphs.
problem Predicting systemic financial transitions from evolving market interactions.
method Systemic Risk Radar (SRR) models financial markets as multi-layer graphs.
result Graph-derived features provide useful early-warning signals compared to feature-based models.
Emerging economies use countercyclical policies to manage crises and dominant currencies.
problem Managing economic crises and fluctuations in dominant currencies like USD and EUR.
method Theoretical analysis, case studies, econometric modeling.
result Emerging economies can stabilize growth with countercyclical monetary policies.
Client engineering of XVA in crisis and normality: Restructuring, Mandatory Breaks and Resetsq-fin.PR
The paper analyzes XVA reduction strategies in financial crises using Mandatory Breaks, Restructuring, and Resets.
problem Challenges in client XVA management during crises when continuous collateralization is not feasible.
method Compares multiple trade strategies including Mandatory Breaks, Restructuring, and Resets.
result Resets can be twice as effective as Mandatory Breaks/Restructuring if there is no credit recovery. When recovery is at least 1/3, Mandatory Breaks/Restructuring can be more effective.
Using data from world stock exchange indices prior to and during periods of global financial crises, clusters and networks of indices are built for different thresholds and diverse periods of time, so that it is then possible to analyze how clusters are formed according to correlations among indices and how they evolve…
Study shows negative war news correlates with increased stock market volatility.
problem Understanding the impact of geopolitical events on financial markets.
method Used BERT model for sentiment analysis and GARCH model for volatility forecasting.
result Negative news sentiment during geopolitical crises is associated with increased stock market volatility.
The paper introduces a new method for detecting financial data outliers.
problem Detecting outliers in multivariate financial data.
method The approach uses the Cumulant Generating Function (CGF) to maximize projections on directions.
result The CGF maximization approach can be interpreted as an extension of principal component analysis.
Herd behavior is an important economic phenomenon, especially in the context of the recent financial crises. In this paper, herd behavior in global stock markets is investigated with a focus on intercontinental comparison. Since most existing herd behavior indices do not provide a comparative method, we propose a new h…
Optimal early liquidation strategy reduces financial losses during crises.
problem Substantial losses from simultaneous asset liquidation at depressed prices.
method Developed a worst-case approach for optimal early liquidation, considering uncertainty of other banks' decisions.
result Proposed robust optimal strategy maximizes liquid assets' value at clearing, even with uncertainty.
Cross-border equity and long-term debt securities portfolio investment networks are analysed from 2002 to 2012, covering the 2008 global financial crisis. They serve as network-proxies for measuring the robustness of the global financial system and the interdependence of financial markets, respectively. Two early-warni…
Study examines Fed's pandemic communication strategies.
problem Analyzing Federal Reserve's communication during the COVID-19 pandemic.
method Sentiment analysis, topic modeling, comparative analysis of previous crises.
result Fed's communication during the pandemic focused on financial stability, market volatility, social welfare, and unconventional monetary policy.
Decomposes financial networks to reveal cause-effect hierarchies during crises.
problem Complex financial networks are hard to interpret due to Granger causality.
method Helmholtz-Hodge-Kodaira decomposition to separate networks into rotational and gradient components.
result Precious metals and pharmaceutical products are identified as causal drivers during crises.
Financial markets are systems with the complex behavior, that can be hardly analyzed by means of linear methods. Recurrence Quantification Analysis (RQA) is a nonlinear methodology, which is able to work with the nonstationary and short data series. Thus, we apply RQA for the studying of the critical events on financia…
Study on diversifying equity portfolios during financial crises and stability.
problem Determining the effectiveness of diversification strategies during financial crises and stability.
method Analysis of 20 years of US stock price data, including GFC and COVID-19 crashes, using eigenvalues, graph-theoretic diagnostics, and hierarchical clustering.
result During financial crises, diversification via sector-based portfolios is ineffective, while during stability, 30-40 stocks provide sufficient diversification.
Banking system crises are complex events that in a short span of time can inflict extensive damage to banks themselves and to the external economy. The crisis literature has so far identified a number of distinct effects or channels that can propagate distress contagiously both directly within the banking network itsel…
Boosting improves trend detection in financial data.
problem Discovering trends in financial data during crises and recoveries.
method Extends boosting to higher order integrated processes and series with roots near unity.
result Boosting captures downturns and recoveries more accurately.
We examine volume computation of general-dimensional polytopes and more general convex bodies, defined as the intersection of a simplex by a family of parallel hyperplanes, and another family of parallel hyperplanes or a family of concentric ellipsoids. Such convex bodies appear in modeling and predicting financial cri…
The paper shows how cross-ownership increases equity correlations during financial crises.
problem Understanding and explaining rising correlations in financial markets during crises.
method Examined interlinkages among firms through a financial network, mathematically relating equity correlations to asset correlations and network sensitivity.
result Equity correlations are higher than asset correlations, and this relationship is independent of the equities level.
Survey of stablecoins to reduce cryptocurrency volatility.
problem Reduction of cryptocurrency volatility during financial crises.
method Classification of stablecoin approaches and assessment of tradeoffs.
result Different stablecoin types offer varying tradeoffs and challenges.
Model explains stock price bubbles through debt crises and financial crashes.
problem Analyzing financial fragility and stock price bubbles.
method Stock-flow consistent model integrating macroeconomic and financial market dynamics.
result Model demonstrates how credit expansion and crash risk lead to recurrent boom-bust cycles.
Study examines how information flows in Indian stock market during crises.
problem Understanding information diffusion in financial networks during market turbulence.
method Applied communicability, a measure of ease of information flow, to financial networks.
result Approximately 70% and 80% of stock pairs exhibit significant changes in communicability during crises.
Optimal bailout policies identified for financial institutions using AI.
problem Managing systemic financial risk during crises.
method Modelled bailout decisions as a Markov Decision Process (MDP) with network dynamics.
result Identified optimal investment policies to limit financial crises effects.
This paper investigates the common intuition suggesting that during crises the shape of the financial market clearly differentiates from that of random walk processes. In this sense, it challenges the analysis of the nature of financial markets proposed by Fama and his associates. For this, a geometric approach is prop…
Study reveals structural differences in financial networks near and far from crises using balance theory.
problem Understanding the complex behavior of stocks and their collective behavior in financial crises.
method Investigates financial networks by triplet interaction in the framework of balance theory, focusing on higher-order interactions.
result Formation of an ordered structure in crisis networks makes them resistant to disorder, with a critical temperature measuring crisis strength.
The proposed model is aimed to reveal important patterns in the behavior of a simplified financial system. The patterns could be detected as regular cycles consisting of debt bubbles and crises. Financial cycles have a well defined structure and form periodic sequences along the axis of credit expansion while retaining…
The paper addresses XVA valuation under market crises using a renewal process.
problem XVA valuation without considering market crises and illiquidity.
method Using an alternating renewal process, the paper develops a framework to price XVA under a state-dependent financial regime.
result The XVA price is characterized as a solution to a backward stochastic differential equation (BSDE).
We study the dynamic interactions and structural changes in global financial indices in the years 1998-2012. We apply a principal component analysis (PCA) to cross-correlation coefficients of the stock indices. We calculate the correlations between principal components (PCs) and each asset, known as PC coefficients. A …
A financial system contains many elements networked by their relationships. Extensive works show that topological structure of the network stores rich information on evolutionary behaviors of the system such as early warning signals of collapses and/or crises. Existing works focus mainly on the network structure within…
Linear and nonlinear market correlations: characterizing financial crises and portfolio optimizationq-fin.ST
Pearson correlation and mutual information based complex networks of the day-to-day returns of US S&P500 stocks between 1985 and 2015 have been constructed in order to investigate the mutual dependencies of the stocks and their nature. We show that both networks detect qualitative differences especially during (recent)…
This paper uses SampEn to measure and predict oil price volatility.
problem Measuring and predicting volatility in international oil prices.
method Sample Entropy (SampEn) compared with standard deviation; machine learning algorithms used.
result SampEn effectively predicts traditional volatility measures, especially during financial crises.
Geometric framework for portfolio analysis detects financial crises and evaluates performance.
problem Detecting financial crises and evaluating portfolio performance in volatile markets.
method Geometric framework, copula models, statistical computing.
result Automated crisis detection and new portfolio score for performance evaluation.
On the use of artificial intelligence in financial regulations and the impact on financial stabilityecon.GN
AI threatens financial stability through misuse and stealth adoption.
problem Misuse and stealth adoption of AI in financial regulations.
method Analysis of AI's potential risks and criteria for AI suitability.
result AI will likely become widely used by stealth, affecting high-level financial functions.
Predicting panic is of critical importance in many areas of human and animal behavior, notably in the context of economics. The recent financial crisis is a case in point. Panic may be due to a specific external threat, or self-generated nervousness. Here we show that the recent economic crisis and earlier large single…
Method identifies financial rogue waves close to their onset.
problem Identifying extreme financial events close to their onset.
method Analogy between rogue waves in optics and financial volatility, using Schrödinger equation with potential shaped by Kerr nonlinearity.
result Numerical gradient spikes at the onset of extreme financial events.
This study examined how the correlation and network structure of 30 global indices and 145 local Korean indices belonging to the KOSPI 200 have changed during the 13-year period, 2000-2012. The correlations among the indices were calculated. The results showed that although the average correlations of the global indice…
Local and Global Balance in Financial Correlation Networks: an Application to Investment Decisionsq-fin.PM
The study identifies assets with local balance deviating from global balance to mitigate financial risk.
problem Selecting outperforming assets during financial crises.
method Investigates deviations of local balance from global balance as a criterion for asset selection.
result Assets with local balance deviating from global balance can mitigate financial risk.
Modelling Returns and Volatilities During Financial Crises: a Time Varying Coefficient Approachq-fin.GN
We examine how the most prevalent stochastic properties of key financial time series have been affected during the recent financial crises. In particular we focus on changes associated with the remarkable economic events of the last two decades in the mean and volatility dynamics, including the underlying volatility pe…
The paper analyzes how companies' investments before crises affect their performance after crises.
problem Understanding how companies' investments before financial crises impact their performance afterward.
method Cluster analysis using Voronoi tessellation with statistical outliers identified.
result Positive investments before crises are associated with better performance after crises.
New method forecasts systemic risk with improved precision.
problem Improving the estimation of systemic risk measures.
method De-volatilizing observations and using extreme value theory for forecasting.
result Valid MES forecasts with good coverage in simulations and empirical applications.