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 analyze a new type of debt that rewards investors based on company performance.
The paper examines how CoCo bonds can enhance financial stability in interconnected banking systems.
The study analyzes pricing and hedging of STCDOs using an affine model with a catastrophic risk component.
Quantum computing speeds up CDO pricing models.
This paper considers the modelling of collateralized debt obligations (CDOs). We propose a top-down model via forward rates generalizing Filipović, Overbeck and Schmidt (2009) to the case where the forward rates are driven by a finite dimensional Lévy process. The contribution of this work is twofold: we provide condit…
The problem of existence of arbitrage free and monotone CDO term structure models is studied. Conditions for positivity and monotonicity of the corresponding Heath-Jarrow-Morton-Musiela equation for the -forward rates with the use of the Milian type result are formulated. Two state spaces are taken into account - of…
Swapping debt contracts can mitigate risk in financial networks.
Arora, Barak, Brunnermeier, and Ge showed that taking computational complexity into account, a dishonest seller could strategically place lemons in financial derivatives to make them substantially less valuable to buyers. We show that if the seller is required to construct derivatives of a certain form, then this pheno…
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…
We consider a structural default model in an interconnected banking network as in Lipton [International Journal of Theoretical and Applied Finance, 19(6), 2016], with mutual obligations between each pair of banks. We analyse the model numerically for two banks with jumps in their asset value processes. Specifically, we…
Networked-guarantee loans may cause the systemic risk related concern of the government and banks in China. The prediction of default of enterprise loans is a typical extremely imbalanced prediction problem, and the networked-guarantee make this problem more difficult to solve. Since the guaranteed loan is a debt oblig…
Credit and liquidity risks represent main channels of financial contagion for interbank lending markets. On one hand, banks face potential losses whenever their counterparties are under distress and thus unable to fulfill their obligations. On the other hand, solvency constraints may force banks to recover lost funding…
We explore the possibilities of importance sampling in the Monte Carlo pricing of a structured credit derivative referred to as Collateralized Debt Obligation (CDO). Modeling a CDO contract is challenging, since it depends on a pool of (typically about 100) assets, Monte Carlo simulations are often the only feasible ap…
We study a coin-tossing model used by a ratings agency to justify the sale of constant proportion debt obligations (CPDOs), and prove that it was impossible for CPDOs to achieve in a finite lifetime the Cash-In event of doubling its capital. In the best-case scenario of a two-headed coin, we show that the goal of attai…
We propose a model of inter-bank lending and borrowing which takes into account clearing debt obligations. The evolution of log-monetary reserves of banks is described by coupled diffusions driven by controls with delay in their drifts. Banks are minimizing their finite-horizon objective functions which take into a…
Proposes a decentralized insurance protocol for DeFi.
The writers propose a mathematical Method for deriving risk weights which describe how a borrower's income, relative to their debt service obligations (serviceability) affects the probability of default of the loan. The Method considers the borrower's income not simply as a known quantity at the time the loan is made, …
This paper considers mutual obligations in the interconnected bank system and analyzes their influence on joint and marginal survival probabilities as well as CDS and FTD prices for the individual banks. To make the role of mutual obligations more transparent, a simple structural default model with banks' assets driven…
Botswana's agricultural credit scheme is unsustainable and needs reform.
Analyzes incentives and strategies in financial networks.
The stability of the financial system is associated with systemic risk factors such as the concurrent default of numerous small obligors. Hence it is of utmost importance to study the mutual dependence of losses for different creditors in the case of large, overlapping credit portfolios. We analytically calculate the m…
We follow a long path for Credit Derivatives and Collateralized Debt Obligations (CDOs) in particular, from the introduction of the Gaussian copula model and the related implied correlations to the introduction of arbitrage-free dynamic loss models capable of calibrating all the tranches for all the maturities at the s…
A mechanism to share risks and costs with guarantees against extreme outcomes.
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 …
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…
Paper improves CDO calibration using Magnus Expansion and Deep Learning.
KLD token adjusts supply based on macroeconomic debt index, creating deflationary effect.
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.
Unified framework for complex financial networks using lattice theory.
AI improves credit rating predictions over traditional methods.
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.…
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 major perspective of this paper is to provide more evidence into the empirical determinants of capital structure adjustment in different macroeconomics states by focusing and discussing the relative importance of firm-specific and macroeconomic characteristics from an alternative scope in U.S. This study extends th…
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 paper we present formulas for the valuation of debt and equity of firms in a financial network under comonotonic endowments. We demonstrate that the comonotonic setting provides a lower bound and Jensen's inequality provides an upper bound to the price of debt under Eisenberg-Noe financial networks with bankrup…
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.
Debt-financed collateral in DeFi increases stability risks.
JFR-rg model explains Japan's stable debt despite high interest rates and low growth.
Article offers models for choosing sale-leaseback vs debt.
The paper addresses dynamic capital structure models with defaultable debt, proving existence and uniqueness.
Debt swaps improve financial networks by optimizing clearing payments and stability.
The study examines how climate risk influences sovereign debt default decisions.
We consider here a Fokker--Planck equation with variable coefficient of diffusion which appears in the modeling of the wealth distribution in a multi-agent society. At difference with previous studies, to describe a society in which agents can have debts, we allow the wealth variable to be negative. It is shown that, e…
The paper analyzes bank decisions in a three-step model, focusing on equity and debt raising.
We deal with the problem of outsourcing the debt for a big investment, according two situations: either the firm outsources both the investment (and the associated debt) and the exploitation to a private consortium, or the firm supports the debt and the investment but outsources the exploitation. We prove the existence…