The study examines how climate risk influences sovereign debt default decisions.
problem The relationship between climate risk and sovereign debt default decisions.
method Calibration of a model to analyze the credit spreads of sovereign bonds and the impact of climate vulnerability on bond spreads.
result Climate risk does not significantly influence the decision to default on sovereign debt.
Possible solution of problem of sovereign debts is suggested. At the current moment this solution still can be provided only by methods of the world monetary policy.
Researchers model sovereign Uruguayan debt using Gaussian models to improve pricing of non-traded bonds.
problem Lack of liquidity in the bond market.
method Four Gaussian models fitted to historical data of frequently traded bonds.
result Good adjustment of bond price curves, enabling non-arbitrage pricing of non-traded instruments and derivative securities.
Recently, there has been a growing interest in network research, especially in these fields of biology, computer science, and sociology. It is natural to address complex financial issues such as the European sovereign debt crisis from the perspective of network. In this article, we construct a network model according t…
The paper develops a model for sovereign debt dynamics with explicit maturity structure.
problem Analyzing the sustainability and risk of long-term sovereign debt issuance.
method Discrete-time model with explicit maturity structure, deterministic and stochastic extensions.
result The model identifies conditions for ergodic convergence and derives analytical formulas for key metrics.
Model prices sovereign contingent convertible bonds during crises.
problem Pricing Sovereign Contingent Convertible bonds (S-CoCo) during crises.
method Model CDS spread regime switching as a hidden Markov process, coupled with a mean-reverting stochastic process. Use Longstaff-Schwartz American option pricing framework for simulation.
result Computed future state contingent S-CoCo prices for risk management.
Study finds no significant impact of US sovereign credit rating downgrade on equity market.
problem Impact of US sovereign credit rating downgrade on US equity market.
method Event study methodology using three companies and S&P500 index.
result No significant effects of US sovereign credit rating downgrade on US equity market.
Study Italian sovereign bonds pricing using multi-factor models.
problem Empirical analysis of multi-factor models for Italian sovereign bonds.
method Calibration of Cox-Ingersoll-Ross and Vasicek models using Kalman filter and maximum likelihood estimation.
result Optimization algorithms improve term structure fitting over 12 years, including financial crises.
During the last two years, Europe has been facing a debt crisis, and Greece has been at its center. In response to the crisis, drastic actions have been taken, including the halving of Greek debt. Policy makers acted because interest rates for sovereign debt increased dramatically. High interest rates imply that defaul…
This study uses machine learning to predict sovereign credit ratings and identifies key factors.
problem Predicting sovereign credit ratings and identifying important factors.
method Used Multilayer Perceptron (MLP), Classification and Regression Trees (CART), Support Vector Machines (SVM), Naïve Bayes (NB), and Ordered Logit (OL) models.
result MLP is the best model for predicting sovereign credit ratings with a 68% accuracy.
This study applies Benford's law to monitor CDS quotes, revealing discrepancies by country and tenor.
problem Monitoring sovereign CDS quotes for health and default probability using Benford's law.
method Applying Benford's law to daily changes in sovereign CDS spreads for 13 European countries over 2008-2015.
result Differences in CDS quotes by country and tenor, with Greece showing unique behavior.
Study shows EU countries have worsening debts and deficits.
problem Worsening public debts and deficits in EU countries.
method Statistical analysis of public debts and deficits between EU and non-EU countries.
result EU countries have worse public debts and deficits than non-EU countries, especially after Euro introduction.
The European sovereign debt crisis has impaired many European banks. The distress on the European banks may transmit worldwide, and result in a large-scale knock-on default of financial institutions. This study presents a computer simulation model to analyze the risk of insolvency of banks and defaults in a bank credit…
Study describes how national credit operations emerge from subnational data.
problem Understanding national credit dynamics from subnational data.
method Proposed diffusion process to aggregate subnational credit operations.
result National credit dynamics accurately described with proposed model.
We use principle component analysis (PCA) of cross correlations in European government bonds and European stocks to investigate the systemic risk contained in the European economy. We tackle the task to visualize the evolution of risk, introducing the conditional average rolling sum (CARS). Using this tool we see that …
The credit crisis and the ongoing European sovereign debt crisis have highlighted the native form of credit risk, namely the counterparty risk. The related Credit Valuation Adjustment, (CVA), Debt Valuation Adjustment (DVA), Liquidity Valuation Adjustment (LVA) and Replacement Cost (RC) issues, jointly referred to in t…
Study shows how bad and good volatility spread differently in forex markets.
problem Understanding how volatility spreads asymmetrically in forex markets.
method High-frequency, intra-day data of major currencies from 2007-2015.
result Negative spillovers are linked to sovereign debt crisis, positive to subprime and monetary policies.
Paper uses PCA to analyze Chinese sovereign bonds and discusses bond immunization.
problem Analyzing factors affecting Chinese sovereign bond yield changes.
method Applied Principal Component Analysis (PCA) on bond yield data.
result Identified principal factors influencing Chinese sovereign bond yield changes.
Copula models for sovereign ratings improved by incorporating climate risk.
problem Modeling nonlinear dependence and clustering in sovereign rating migrations.
method Mixed-difference transformation, MAGMAR(1,1) copula process, consistent and asymptotically normal estimators.
result Gumbel MAGMAR(1,1) specification outperforms other models in empirical performance.
Geopolitical and geoeconomic shocks affect sovereign risk differently, with distinct transmission channels.
problem Understanding how geopolitical and geoeconomic shocks impact sovereign credit risk.
method Daily panel data of 42 economies over 2018-2025; semistructural framework; Shapley-Taylor decomposition; machine learning predictions; placebo and sign-restricted SVAR evidence.
result Geopolitical shocks primarily increase sovereign credit spreads through direct repricing, while geoeconomic shocks mainly affect spreads through financial conditions and policy uncertainty.
Model measures diversification in Austrian interbank market, showing increased homogeneity.
problem Measuring diversification in Austrian interbank market.
method Dynamic network model with Markov property to capture time dependencies.
result Core banks tend to distribute market exposures more equally over time.
Study examines how COVID-19 affects bond yields using network filtering methods.
problem Impact of COVID-19 on sovereign bond yields.
method Network filtering methods applied to a correlation matrix of sovereign bond yields.
result Mean correlation decreases across all filtering methods during the COVID-19 period.
This paper examines how ESG factors influence sovereign bond yields and credit ratings.
problem The impact of ESG factors on sovereign bond yields and credit ratings is not fully understood.
method The study identifies relevant ESG indicators and compares their importance in bond pricing and credit ratings.
result ESG factors, particularly the G and S pillars, are more important for credit ratings than the E pillar.
New model explains low interest rates and large bond market jumps.
problem Explaining recent observations in sovereign bond market.
method Introduces α-CIR model using α-stable Lévy process and branching property. result Unified and parsimonious model for low interest rates and large jumps.
This study categorizes RWA tokenization challenges and solutions.
problem Navigating the gap between on-chain deterministic code and off-chain probabilistic reality.
method Taxonomy and comparative analysis of RWA protocols, legal and technical standards.
result RWA tokenization requires overcoming legal and technical interoperability issues.
Study on systemic risk in European insurance sector, showing insurer connections during stress.
problem Understanding systemic risk connectedness in European insurance sector.
method Common connectedness framework applied to returns, volatility, value-at-risk, and expected shortfall.
result Insurers are a significant component of systemic risk connectedness, especially during stress episodes.
Optimal debt reduction policy found for reducing debt-to-GDP ratio.
problem Minimizing total expected costs of debt and interventions.
method Singular stochastic control problem, probabilistic arguments, optimal stopping rule, nonlinear integral equation.
result Optimal debt reduction policy keeps debt-to-GDP ratio under an inflation-dependent ceiling.
Critical debt levels are determined based on debt duration and economic system fractal dimension.
problem Determining the critical debt levels for borrower bankruptcy.
method Two independent methods: entropy maximum and chemical potential zero.
result Critical debt values are consistent and depend on the velocity of money circulation.
We present an elementary analysis of the dynamical aspects of the GDP / government surplus multiplier with relevance to the assessment of a country's debt repayment policy. We show the (at first) counter intuitive result that in order to reduce the Debt/GDP ratio, countries with high Debt to GDP should go into further …
Deep learning improves macroeconomic forecasting and risk assessment.
problem Improving accuracy in macroeconomic forecasting and sovereign risk assessment.
method Nowcasting and forecasting using deep learning techniques.
result Deep learning methods outperform traditional econometric techniques in out-of-sample performance.
Compound interest as well as inflation grows exponentially with time, whereas other means to repay debt grow polynomially. For this and other, mostly political, reasons, debt without inflation is unsustainable. We suggest a discontinuous way to eliminate debt by nullifying it. This scenario is preferable to current cen…
KLD token adjusts supply based on macroeconomic debt index, creating deflationary effect.
problem Managing deflationary pressures in digital assets.
method Debt-indexed supply adjustments linked to macroeconomic data.
result Deflationary mechanism strengthens as debt rises.
The paper presents formulas for valuing debt and equity in interconnected firms with comonotonic endowments.
problem Valuation of debt and equity in interconnected firms with comonotonic endowments.
method Formulas derived under comonotonic setting, demonstrating lower and upper bounds using Jensen's inequality.
result The comonotonic setting provides a lower bound and Jensen's inequality an upper bound to the price of debt.
Public debt is one of the important economic variables that quantitatively describes a nation's economy. Because bankruptcy is a risk faced even by institutions as large as governments (e.g. Iceland), national debt should be strictly controlled with respect to national wealth. Also, the problem of eliminating extreme p…
This research improves debt collection strategies using advanced machine learning.
problem Accurate estimation of propensity to pay and cashflow for optimal debt collection.
method Developed a machine learning framework with pre-processing and model selection.
result The proposed model outperforms current industry strategies.
Fokker-Planck model shows debts are absorbed over time in wealth distribution.
problem Modeling wealth distribution with agents having debts.
method Fokker-Planck equation with variable diffusion coefficient.
result Debts are absorbed over time, leading to a positive wealth distribution.
The aim of the present article is to treat the Greek public debt issue strictly as a curve fitting problem. Thus, based on Eurostat data and using the Mathematica technical computing software, an exponential function that best fits the data is determined modelling how the Greek public debt expands with time. Exploring …
We propose a unified structural credit risk model incorporating both insolvency and illiquidity risks, in order to investigate how a firm's default probability depends on the liquidity risk associated with its financing structure. We assume the firm finances its risky assets by mainly issuing short- and long-term debt.…
The paper examines how CoCo bonds can enhance financial stability in interconnected banking systems.
problem Enhancing financial stability in interconnected banking systems.
method Financial network model with contingent convertible (CoCo) debt obligations.
result Replacing unsecured interbank debt with CoCo debt decreases systemic risk and increases bank shareholder value.
The seniority of debt, which determines the order in which a bankrupt institution repays its debts, is an important and sometimes contentious feature of financial crises, yet its impact on system-wide stability is not well understood. We capture seniority of debt in a multiplex network, a graph of nodes connected by mu…
In this letter, I consider the issue of pricing risky debt by following Merton's approach. I generalize Merton's results to the case where the interest rate is modeled by the CIR term structure. Exact closed forms are provided for the risky debt's price.
JFR-rg model explains Japan's stable debt despite high interest rates and low growth.
problem Understanding Japan's stable government debt despite high interest rates and low growth.
method Formalizes financial repression channels through JFR-rg model, incorporating financial repression bias and exchange-rate channel.
result Identifies Normalization Trap and Captive Financial System Parameter, showing debt dynamics under financial repression.
Debt-financed collateral in DeFi increases stability risks.
problem Financial stability risks in DeFi ecosystems due to debt-financed collateral.
method Categorization and classification algorithm to measure debt-financed collateral.
result Wide-spread use of stablecoins as debt-financed collateral increases financial stability risks.
The paper addresses dynamic capital structure models with defaultable debt, proving existence and uniqueness.
problem Dynamic capital structure models with an investor break-even condition may not generate a contraction mapping.
method Provided an example and used a dual problem and change of measure to prove existence and uniqueness.
result A unique Markov-perfect equilibrium exists where firm decisions reflect state-dependent targets.
Article offers models for choosing sale-leaseback vs debt.
problem Choosing between sale-leaseback and debt for commercial real estate.
method Developed decision models for leasing.
result Models can be applied to various types of leasing.
Debt swaps improve financial networks by optimizing clearing payments and stability.
problem Improving financial network stability and efficiency through debt swaps.
method Analyzing computational complexity of debt swaps, focusing on semi-positive swaps and v-improving swaps.
result Polynomial length of sequences of semi-positive v-improving swaps for ranking-based clearing, but NP-hard for arbitrary v-improving swaps.
This study uses quantile regression to analyze U.S. firms' capital structure across different leverage levels.
problem Empirical determinants of capital structure adjustment in various macroeconomic states.
method Quantile regression method to investigate firm-specific and macroeconomic characteristics.
result Long-term and short-term debt ratios adjust at different speeds, with short-term debt increasing and long-term debt decreasing over time.
Axient handles debt-free finality for leveraged binary event markets.
problem Managing debt and finality in leveraged event positions with uncertain outcomes.
method Axient separates leverage maturity from claim maturity, using a protocol to select smallest sale covering debt.
result Proves robust ex-ante debt clearing and debt-free-finality invariants, maximal residual spot exposure, and payout-vector invariance.