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.
We show that some specific market risk measures implied by current international capital regulation (the Basel Accords and the Capital Adequacy Directive of the European Union) violate the obvious requirement of convexity in some regions in the space of portfolio weights.
Study uses LLMs to simplify financial regulation interpretation.
Regulations impose idiosyncratic capital and funding costs for holding derivatives. Capital requirements are costly because derivatives desks are risky businesses; funding is costly in part because regulations increase the minimum funding tenor. Idiosyncratic costs mean no single measure makes derivatives martingales f…
Model financial contagion and capital regulation under price impacts.
Study shows how capital constraints can lead to systemic crises in financial systems.
We introduce a model in which a regulator employs mechanism design to embed her human capital beta signal(s) in a firm's capital structure, in order to enhance the value of her post career change indexed executive stock option contract with the firm. We prove that the agency cost of this revolving door behavior increas…
Paper proposes efficient capital allocation methods for banks under FRTB.
Study examines how EU's Value at Risk constraints affect insurance oligopolies.
In addition to constraining bilateral exposures of financial institutions, there are essentially two options for future financial regulation of systemic risk (SR): First, financial regulation could attempt to reduce the financial fragility of global or domestic systemically important financial institutions (G-SIBs or D…
Under Solvency II the computation of capital requirements is based on value at risk (V@R). V@R is a quantile-based risk measure and neglects extreme risks in the tail. V@R belongs to the family of distortion risk measures. A serious deficiency of V@R is that firms can hide their total downside risk in corporate network…
Paper introduces new risk measures for default risk and model uncertainty.
Dynamic model considers private asset markets' complexities.
Any solvency regime for financial institutions should be aligned with the fundamental objectives of regulation: protecting liability holders and securing the stability of the financial system. The first objective leads to consider surplus-invariant capital adequacy tests, i.e. tests that do not depend on the surplus of…
Systemic risk refers to the risk that the financial system is susceptible to failures due to the characteristics of the system itself. The tremendous cost of systemic risk requires the design and implementation of tools for the efficient macroprudential regulation of financial institutions. The current paper proposes a…
The European insurance sector will soon be faced with the application of Solvency 2 regulation norms. It will create a real change in risk management practices. The ORSA approach of the second pillar makes the capital allocation an important exercise for all insurers and specially for groups. Considering multi-branches…
Worldcoin aims to make cryptocurrency transparent and accessible.
A new capital adequacy test is proposed based on value-at-risk.
We present a broad agenda for meaningful banking regulation reform aiming the creation of evolutive competitive environment to maximize the effectiveness of international financial system through the introduction of fair competition process among the banks in free market capitalism. We assume that the international fin…
Paper proposes a capital allocation formula for insurance companies compliant with Solvency II.
Decentralised fund framework allocates capital via tokenised vaults.
Study validates capital structure theories in Indian public sector banks.
Modeling pollution from competing firms using mean-field games.
New risk measure improves creditor protection in financial regulation.
The financial crisis showed the importance of measuring, allocating and regulating systemic risk. Recently, the systemic risk measures that can be decomposed into an aggregation function and a scalar measure of risk, received a lot of attention. In this framework, capital allocations are added after aggregation and can…
In order to adapt to the liberalization of the financial sphere started in the Eighties, marked in particular by the end of the framing of credit, the disappearance of the various forms of protection of the State whose profited the banks, and the privatization of the near total of the establishments in Europe, the bank…
Paper improves SVaR estimation for stress testing under macro scenarios using a hybrid GPR-HS framework.
Research predicts money market volume based on capital market and bank rates ratio.
The Basel II internal ratings-based (IRB) approach to capital adequacy for credit risk plays an important role in protecting the Australian banking sector against insolvency. We outline the mathematical foundations of regulatory capital for credit risk, and extend the model specification of the IRB approach to a more g…
SHARC explains machine learning risk models for regulatory capital, linking outputs to scenarios.
Study shows feedback effect between capital flows volatility and financial stability in DRC.
Blockchain disrupts corporate finance, but challenges remain.
Modeling price-mediated contagion in financial systems with capital requirements.
Multinational corporations use highly complex structures of parents and subsidiaries to organize their operations and ownership. Offshore Financial Centers (OFCs) facilitate these structures through low taxation and lenient regulation, but are increasingly under scrutiny, for instance for enabling tax avoidance. Theref…
Crypto markets show negative spillovers between chains, not positive co-movements.
Optimal bailout policies identified for financial institutions using AI.
Framework for realistic insurance liability valuation.
The paper analyzes bank decisions in a three-step model, focusing on equity and debt raising.
Understanding how funding and 4H context regulate crypto markets.
The negative externalities from an individual bank failure to the whole system can be huge. One of the key purposes of bank regulation is to internalize the social costs of potential bank failures via capital charges. This study proposes a method to evaluate and allocate the systemic risk to different countries/regions…
We address the problem of banking system resilience by applying off-equilibrium statistical physics to a system of particles, representing the economic agents, modelled according to the theoretical foundation of the current banking regulation, the so called Merton-Vasicek model. Economic agents are attracted to each ot…
New risk measures for financial networks avoid external capital, reducing systemic risk.
Empirical study of CAPM and Fama-French model in Chinese A-share market.
Many models of market dynamics make use of the idea of wealth exchanges among economic agents. A simple analogy compares the wealth in a society with the energy in a physical system, and the trade between agents to the energy exchange between molecules during collisions. However, while in physical systems the equiparti…
This study examines the execution phase of corporate share buy-backs, highlighting inefficiencies and costs.
We educe a perspective on how best to regulate the bank of tomorrow in frames of debate launched by the International Centre for Financial Regulation and Financial Times. Our goal is to create a conceptual framework for policymakers and regulators to shape the international financial system in century of globalization …
I explain the root of persistent failure of efforts to remove tax-induced distortions of economic incentives. It lies in FUNDAMENTAL IMPOSSIBILITY of objectively evaluating tax base. Distortions can be entirely avoided in the sector of publicly traded corporations. Evaluation can be bypassed by taxing it in shares (to …
Deviance Voronoi residuals improve earthquake insurance risk assessment.
Study examines how bank holding structures affect financial stress spread.