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.
Model analyzes inventory growth cycles with debt-financed investment.
problem Understanding inventory growth cycles in economies with debt financing.
method Continuous-time stock-flow consistent model for inventory dynamics.
result Model reveals Kitchin cycles in short-run dynamics.
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.…
Study on how China's SMEs finance changed post-crisis, focusing on internal vs. external financing.
problem Analyzing SME financing problems before and after the global financial crisis.
method Regression analysis based on Trade-Off Theory, empirical research on 158 firms.
result SMEs with high growth rates are more likely to obtain external financing after a financial crisis.
I sketch a program for a microeconomic theory of the main component of the business cycle as a recurring disequilibrium, driven by incompleteness of the financial market and by information asymmetries between borrowers and lenders. This proposal seeks to incorporate five distinct but connected processes that have been …
We consider that the price of a firm follows a non linear stochastic delay differential equation. We also assume that any claim value whose value depends on firm value and time follows a non linear stochastic delay differential equation. Using self-financed strategy and replication we are able to derive a Random Partia…
Study shows long-term debt impacts financial growth of non-financial firms listed at Nairobi Securities Exchange.
problem Declining financial performance and reluctance to lend to non-financial firms listed at Nairobi Securities Exchange.
method Descriptive and panel data analysis of 45 non-financial firms over 10 years.
result Long-term debt positively and significantly influences financial growth measured by earnings per share and market capitalization.
This paper improves capital efficiency in AMM protocols with leverage.
problem Improving capital efficiency in Automated Market Makers (AMM).
method Formalizes leveraged liquidity provisioning, defines margin level, assets, and debt.
result Leveraged liquidity positions are safe and possess desirable properties.
Study assesses short-term debt's impact on non-financial firms' financial growth.
problem Declining financial performance and reluctance to lend to non-financial firms listed at Nairobi Securities Exchange.
method Explanatory research design, descriptive statistics, and panel data analysis.
result Short-term debt positively and significantly influences financial growth.
This article describes and explores taxes and debt in finance. Here a situation is thought about, where tax payments would qualify to be considered as debt. Using this principle we can infer that it is possible to create and price a type of bond (Tax Normalization Guarantee) for companies, which would allow them to ent…
Quantum computing speeds up CDO pricing models.
problem Efficiently pricing complex financial products like CDOs.
method Implemented quantum circuits for Gaussian and Normal Inverse Gaussian copula models, using quantum amplitude estimation.
result Quantum computing can significantly speed up CDO pricing compared to Monte Carlo simulations.
This research introduces a control system for managing DeFi money supply.
problem Maintaining the value of issued currency in decentralized finance.
method Introduces a time-weighted Proportional-Integral-Derivative (PID) control system.
result Protects the value of issued currency by adapting to market activities.
Model analyzes debt recycling strategies under various fiscal regimes and jurisdictions.
problem Understanding debt recycling dynamics and their impact on repayment times and equity growth.
method Developed a calibrated model incorporating mortgage interest rates, borrowing costs, and tax shields.
result Introducing positive interest rates without tax shields contracts success regions and lengthens repayment times, but tax shields partially reverse these effects.
AI investors signal higher debt in ESG firms, boosting portfolio management.
problem Determining the value of ESG investing amid AI investment trends.
method Cross-sectional regressions of ESG scores and debt ratios of S&P 500 firms.
result ESG scores signal higher debt in firms, supporting ESG investing.
The study finds significant financial sector volatility and tail risk spillovers to real economy sectors.
problem Volatility and tail risk spillovers from financial to real economy sectors.
method New measure of tail risk spillover, empirical analysis of U.S. economy 2001-2011.
result Significant volatility and tail risk spillovers from financial to real economy sectors, especially during crises.
The 1/3 Financial Rule helps prevent household bankruptcy through balanced spending, savings, and debt repayment.
problem Reducing household bankruptcy risk through effective financial planning.
method Mathematical modeling, game theory, behavioral finance, and technological analysis.
result The 1/3 Financial Rule emerges as a robust solution for supporting household financial stability.
LHIEM model predicts health, income, and employment over years.
problem Lack of path dependency in health policy simulations.
method Discrete-time microsimulation with Markov chain modules.
result Validates health care financing proposal through detailed modeling.
This study examines liquidation risks in DeFi lending markets.
problem Liquidity risks in decentralized finance lending protocols.
method Quantitative analysis of liquidation data from four major DeFi platforms.
result Current liquidation mechanisms incentivize liquidators but lead to excessive collateral sales.
Study uses AI to predict changes in international public finances based on US markets.
problem Understanding correlations between US and international public finances.
method Artificial intelligence and neural networks to model and predict changes.
result Neural network model achieved MSE of 2.79, indicating significant correlation and impact of US market volatility on international markets.
We propose a diffusion process to describe the global dynamic evolution of credit operations at a national level given observed operations at a subnational level in a sovereign country. Empirical analysis with a unique dataset from Brazilian federate constituents supports the conclusions. Despite the heterogeneity obse…
The use of robo-readers to analyze news texts is an emerging technology trend in computational finance. In recent research, a substantial effort has been invested to develop sophisticated financial polarity-lexicons that can be used to investigate how financial sentiments relate to future company performance. However, …
New method estimates corporate default probabilities using indirect data.
problem Lack of direct default rate data for corporate companies.
method Modeling default probability dynamics using Bank of Russia overdue debt data.
result Validated method produces trustworthy default probability series.
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 …
Mitigates DeFi liquidations with reversible call options.
problem Systemic failures in DeFi due to liquidations.
method Introduces reversible call options to prevent liquidations.
result Reduces liquidated collateral by 89.82% in simulations.
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…
Consider the problem of a government that wants to reduce the debt-to-GDP (gross domestic product) ratio of a country. The government aims at choosing a debt reduction policy which minimises the total expected cost of having debt, plus the total expected cost of interventions on the debt ratio. We model this problem as…
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 …
Parastatistic distribution of a total debt owed to a large number of creditors considered in relation to the duration of these debts. The process of debt calculation depends on the fractal dimension of economic system in which this process takes place. Two actual variants of these dimensions are investigated. Critical …
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…
The prevalent view in the economics literature is that a high level of infrastructure investment is a precursor to economic growth. China is especially held up as a model to emulate. Based on the largest dataset of its kind, this paper punctures the twin myths that, first, infrastructure creates economic value, and, se…
This paper tests LLMs in finance to assess ethical behavior.
problem Aligning AI with ethical and legal standards in finance.
method Prompted LLMs to simulate CEO behavior, analyzed with logistic regression.
result Significant heterogeneity in LLMs' unethical behavior propensity.
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.
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.
This paper is a contribution to the Proceedings of the Workshop Complexity, Metastability and Nonextensivity held in Erice 20-26 July 2004, to be published by World Scientific. We propose a generalization to Merton's model for evaluating credit spreads. In his original work, a company's assets were assumed to follow a …
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.
Long-term debt instruments can't be deposit substitutes due to mismatched features.
problem Long-term debt instruments cannot function as deposit substitutes due to their maturity and capital preservation.
method Applied fundamental theory of bond values to 'PEACe Bonds' to show incompatibility.
result Long-term debt instruments cannot be deposit substitutes due to their mismatched features.
Venice used 'helicopter money' to subsidize during famine and plague, but it caused instability.
problem Subsidizing inhabitants during containment policies while preventing long-term debt increase.
method Net-worth helicopter money strategy, equivalent to monetary expansion generating losses to the issuer.
result The strategy caused much monetary instability and had to be quickly reversed.