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.
Paper introduces balanced payment systems to improve liquidity and risk management.
This paper models financial contagion with endogenously determined market liquidity.
In this paper we study the implications of contingent payments on the clearing wealth in a network model of financial contagion. We consider an extension of the Eisenberg-Noe financial contagion model in which the nominal interbank obligations depend on the wealth of the firms in the network. We first consider the prob…
High-value transactions between Australian banks are settled in the Reserve Bank Information and Transfer System (RITS) administered by the Reserve Bank of Australia. RITS operates on a real-time gross settlement (RTGS) basis and settles payments sourced from the SWIFT, the Austraclear, and the interbank transactions e…
Model explains money creation under regulatory constraints.
Interbank lending and borrowing occur when financial institutions seek to settle and refinance their mutual positions over time and circumstances. This interactive process involves money creation at the aggregate level. Coordination mismatch on interbank credit may trigger systemic crises. This happened when, since sum…
Modelling of contagion in interbank networks is discussed. A model taking into account bow-tie structure and dissasortativity of interbank networks is developed. The model is shown to provide a good quantitative description of the Russian interbank market. Detailed arguments favoring the non-percolative nature of conta…
Systemic risks of default contagion in the Russian interbank market are investigated. The analysis is based on considering the bow-tie structure of the weighted oriented graph describing the structure of the interbank loans. A probabilistic model of interbank contagion explicitly taking into account the empirical bow-t…
We discuss the systemic risk implied by the interbank exposures reconstructed with the maximum entropy method. The maximum entropy method severely underestimates the risk of interbank contagion by assuming a fully connected network, while in reality the structure of the interbank network is sparsely connected. Here, we…
We propose a new model of the liquidity driven banking system focusing on overnight interbank loans. This significant branch of the interbank market is commonly neglected in the banking system modeling and systemic risk analysis. We construct a model where banks are allowed to use both the interbank and the securities …
Paper uses interbank contagion to predict U.S. bank defaults, finding it highly explanatory.
Optimized execution model using interbank and internal liquidity.
Model shows how banks' fears of future defaults can cause immediate financial stress.
Systemic risks characterizing the Russian overnight interbank market from the network point of view are analyzed.
In spite of the growing theoretical literature on cascades of failures in interbank lending networks, empirical results seem to suggest that networks of direct exposures are not the major channel of financial contagion. In this paper we show that networks of interbank exposures can however significantly amplify contagi…
Interbank markets are often characterised in terms of a core-periphery network structure, with a highly interconnected core of banks holding the market together, and a periphery of banks connected mostly to the core but not internally. This paradigm has recently been challenged for short time scales, where interbank ma…
The interbank market has a natural multiplex network representation. We employ a unique database of supervisory reports of Italian banks to the Banca d'Italia that includes all bilateral exposures broken down by maturity and by the secured and unsecured nature of the contract. We find that layers have different topolog…
Study confirms eurozone interbank market stability but finds higher collateral reuse.
Systemic liquidity risk, defined by the IMF as "the risk of simultaneous liquidity difficulties at multiple financial institutions", is a key topic in macroprudential policy and financial stress analysis. Specialized models to simulate funding liquidity risk and contagion are available but they require not only banks' …
Study examines large banks' role in interbank markets using game theory.
The article presents calculations that prove practical importance of the earlier derived theoretical relationship between the interest rate on the interbank credit market, volume of investment and the quantity of securities tradable on the stock exchange.
We study insolvency cascades in an interbank system when banks are allowed to insure their loans with credit default swaps (CDS) sold by other banks. We show that, by properly shifting financial exposures from one institution to another, a CDS market can be designed to rewire the network of interbank exposures in a way…
Financial contagion from liquidity shocks has being recently ascribed as a prominent driver of systemic risk in interbank lending markets. Building on standard compartment models used in epidemics, in this work we develop an EDB (Exposed-Distressed-Bankrupted) model for the dynamics of liquidity shocks reverberation be…
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…
A new method streamlines digital payment programming using smart contracts.
Since the 2007-2009 financial crisis, substantial academic effort has been dedicated to improving our understanding of interbank lending networks (ILNs). Because of data limitations or by choice, the literature largely lacks multiple loan maturities. We employ a complete interbank loan contract dataset to investigate w…
Game theory applied to financial networks, focusing on debt repayment strategies.
An interbank market lets participants pool the risk arising from the combination of illiquid investments and random withdrawals by depositors. But it also creates the potential for one bank's failure to trigger off avalanches of further failures. We simulate a model of interbank lending to study the interplay of these …
Study connects bank default models using dynamic contagion.
The global financial system has become highly connected and complex. Has been proven in practice that existing models, measures and reports of financial risk fail to capture some important systemic dimensions. Only lately, advisory boards have been established in high level and regulations are directly targeted to syst…
In this paper we consider a mean-field model of interacting diffusions for the monetary reserves in which the reserves are subjected to a self- and cross-exciting shock. This is motivated by the financial acceleration and fire sales observed in the market. We derive a mean-field limit using a weak convergence analysis …
We use daily data on bilateral interbank exposures and monthly bank balance sheets to study network characteristics of the Russian interbank market over Aug 1998 - Oct 2004. Specifically, we examine the distributions of (un)directed (un)weighted degree, nodal attributes (bank assets, capital and capital-to-assets ratio…
Stablecoins offer efficient settlement but externalize costs and risks.
This paper considers the optimal dividend payment problem in piecewise-deterministic compound Poisson risk models. The objective is to maximize the expected discounted dividend payout up to the time of ruin. We provide a comparative study in this general framework of both restricted and unrestricted payment schemes, wh…
Research examines motivations and factors influencing retailers' payment method choices.
Paper studies central bank's strategy to control systemic risk in interbank system.
Model assesses how supply chain disruptions affect financial stability.
The paper models reciprocity in interbank markets using a statistical null model.
The global financial crisis in 2007-2009 demonstrated that systemic risk can spread all over the world through a complex web of financial linkages, yet we still lack fundamental knowledge about the evolution of the financial web. In particular, interbank credit networks shape the core of the financial system, in which …
The paper examines clearing payments in financial networks to prevent cascaded defaults.
Paper introduces PHI to identify structurally distinct payment patterns in UK municipal procurement.
The paper examines how CoCo bonds can enhance financial stability in interconnected banking systems.
A new model calculates optimal clearing payments in dynamic financial networks.
We analyze cascades of defaults in an interbank loan market. The novel feature of this study is that the network structure and the size distribution of banks are derived from empirical data. We find that the ability of a defaulted institution to start a cascade depends on an interplay of shock size and connectivity. Fu…
Payments data and machine learning improve nowcasting accuracy for macroeconomic indicators.
Study optimizes interbank lending and borrowing to reduce systemic risk.
Blockchain helps secure payments between AI agents.
Study compares empirical systemic risk with balance sheet risk in interbank networks.