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.
Study on stochastic volatility models with external shocks triggering jump cascades.
External or internal shocks may lead to the collapse of a system consisting of many agents. If the shock hits only one agent initially and causes it to fail, this can induce a cascade of failures among neighoring agents. Several critical constellations determine whether this cascade remains finite or reaches the size o…
How, and to what extent, does an interconnected financial system endogenously amplify external shocks? This paper attempts to reconcile some apparently different views emerged after the 2008 crisis regarding the nature and the relevance of contagion in financial networks. We develop a common framework encompassing seve…
This study assesses how economic shocks affect the efficiency and robustness of international pesticide trade networks.
Finance is about how the continuous stream of news gets incorporated into prices. But not all news have the same impact. Can one distinguish the effects of the Sept. 11, 2001 attack or of the coup against Gorbachev on Aug., 19, 1991 from financial crashes such as Oct. 1987 as well as smaller volatility bursts? Using a …
We exploit a continuous time random walk description of stock prices to obtain a fast and accurate evaluation of their volatility from intraday data. We show that financial markets are usefully described as open physical systems. Indeed we find that the process determining market volatility is not stationary while the …
The study assesses how financial networks resist simultaneous price shocks and calculates the worst-case loss.
Study examines how COVID-19 intensified demand variability in U.S. supply chains.
The DebtRank algorithm has been increasingly investigated as a method to estimate the impact of shocks in financial networks, as it overcomes the limitations of the traditional default-cascade approaches. Here we formulate a dynamical "microscopic" theory of instability for financial networks by iterating balance sheet…
Systems with long-range persistence and memory are shown to exhibit different precursory as well as recovery patterns in response to shocks of exogeneous versus endogeneous origins. By endogeneous, we envision either fluctuations resulting from an underlying chaotic dynamics or from a stochastic forcing origin which ma…
This paper presents an exclusive classification of the largest crashes in Dow Jones Industrial Average (DJIA), SP500 and NASDAQ in the past century. Crashes are objectively defined as the top-rank filtered drawdowns (loss from the last local maximum to the next local minimum disregarding noise fluctuations), where the …
Study examines remittances in Nepal, linking external demand and domestic monetary conditions.
We focus on the influence of external sources of information upon financial markets. In particular, we develop a stochastic agent-based market model characterized by a certain herding behavior as well as allowing traders to be influenced by an external dynamic signal of information. This signal can be interpreted as a …
Study models systemic risks in BRICS banks under geopolitical shocks.
Copula models have become popular in different applications, including modeling shocks, in view of their ability to describe better the dependence concepts in stochastic systems. The class of maxmin copulas was recently introduced by Omladič and Ružić. It extends the well known classes of Marshall-Olkin and Marshall co…
Margin trading in which investors purchase shares with money borrowed from brokers is blamed to be a major cause of the 2015 Chinese stock market crash. We propose a cascading failure model and examine how an increase in margin trading increases share price vulnerability. The model is based on a bipartite graph of inve…
We develop a novel stress-test framework to monitor systemic risk in financial systems. The modular structure of the framework allows to accommodate for a variety of shock scenarios, methods to estimate interbank exposures and mechanisms of distress propagation. The main features are as follows. First, the framework al…
Incorporating nonlinearity is paramount to predicting the future states of a dynamical system, its response to shocks, and its underlying causal network. However, most existing methods for causality detection and impulse response, such as Vector Autoregression (VAR), assume linearity and are thus unable to capture the …
Regulator allocates buffers to prevent financial contagion in networks with common assets.
Study financial contagion and risk in sparse networks with directed edges.
Modeling financial chaos with market makers' risk appetite.
Model analyzes mortgage relief during financial hardship.
Study examines how institutional differences and crises affect volatility in ASEAN stock markets.
A growing part of the behavioral finance literature has addressed some of the stylized facts of financial time series as macroscopic patterns emerging from herding interactions among groups of agents with heterogeneous trading strategies and a limited rationality. We extend a stochastic herding formalism introduced for…
This study shows how trade policy uncertainty affects stock-T bill correlations.
New method identifies algo trading strategies as liquidity consumers or providers.
Paper analyzes tech adoption in financial networks, finding key leadership and diffusion dynamics.
Inspired by the bankruptcy of Lehman Brothers and its consequences on the global financial system, we develop a simple model in which the Lehman default event is quantified as having an almost immediate effect in worsening the credit worthiness of all financial institutions in the economic network. In our stylized desc…
When banks choose similar investment strategies the financial system becomes vulnerable to common shocks. We model a simple financial system in which banks decide about their investment strategy based on a private belief about the state of the world and a social belief formed from observing the actions of peers. Observ…
Study reveals 2020 stock crashes were mostly endogenous, not exogenous.
The study reveals asymmetries in US financial shocks' international impacts.
Study shows local governments smooth fiscal shocks from property tax revenues.
Study analyzes how COVID-19 impacts crypto and stock market volatility.
The study uses Random Matrix Theory to identify structural changes in stock markets during shocks.
In this paper we study the distributional properties of a vector of lifetimes in which each lifetime is modeled as the first arrival time between an idiosyncratic shock and a common systemic shock. Despite unlike the classical multidimensional Marshall-Olkin model here only a unique common shock affecting all the lifet…
We have analyzed the Indices of Industrial Production (Seasonal Adjustment Index) for a long period of 240 months (January 1988 to December 2007) to develop a deeper understanding of the economic shocks. The angular frequencies estimated using the Hilbert transformation, are almost identical for the 16 industrial secto…
A simple banking network model is proposed which features multiple waves of bank defaults and is analytically solvable in the limiting case of an infinitely large homogeneous network. The model is a collection of nodes representing individual banks; associated with each node is a balance sheet consisting of assets and …
Currency volatility shocks predict lower excess returns, and buying weak transmitters outperforms selling strong ones.
We empirically test the effects of unanticipated fiscal policy shocks on the growth rate and the cyclical component of real private output and reveal different types of asymmetries in fiscal policy implementation. The data used are quarterly U.S. observati ons over the period 1967:1 to 2011:4. In doing so, we use both …
New method quantifies market shocks and their effects.
Paper addresses unbalanced data in common shock models for loss reserving.
Causal-NECO VaR improves financial risk assessment under market turbulence.
Study examines cryptoasset service providers in Austria, revealing global integration and distinct responses to market shocks.
Catastrophic events, though rare, do occur and when they occur, they have devastating effects. It is, therefore, of utmost importance to understand the complexity of the underlying dynamics and signatures of catastrophic events, such as market crashes. For deeper understanding, we choose the US and Japanese markets fro…
This paper investigates how economic shocks propagate and amplify through the input-output network connecting industrial sectors in developed economies. We study alternative models of diffusion on networks and we calibrate them using input-output data on real-world inter-sectoral dependencies for several European count…
Geopolitical and geoeconomic shocks affect sovereign risk differently, with distinct transmission channels.
Our knowledge about the evolution of guarantee network in downturn period is limited due to the lack of comprehensive data of the whole credit system. Here we analyze the dynamic Chinese guarantee network constructed from a comprehensive bank loan dataset that accounts for nearly 80% total loans in China, during 01/200…
New approach measures systemic risk by absorbing shocks before financial systems deteriorate.