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.
The paper analyzes risks and revenue dynamics of a liquid restaking protocol in decentralized finance.
The theory of multilayer networks is in its early stages, and its development provides vital methods for understanding complex systems. Multilayer networks, in their multiplex form, have been introduced within the last three years to analysing the structure of financial systems, and existing studies have modelled and e…
Financial markets are exposed to systemic risk, the risk that a substantial fraction of the system ceases to function and collapses. Systemic risk can propagate through different mechanisms and channels of contagion. One important form of financial contagion arises from indirect interconnections between financial insti…
In this paper we consider a multivariate model-based approach to measure the dynamic evolution of tail risk interdependence among US banks, financial services and insurance sectors. To deeply investigate the risk contribution of insurers we consider separately life and non-life companies. To achieve this goal we apply …
We introduce a general model for the balance-sheet consistent valuation of interbank claims within an interconnected financial system. Our model represents an extension of clearing models of interdependent liabilities to account for the presence of uncertainty on banks' external assets. At the same time, it also provid…
New method constructs multilayer networks from financial data, capturing dependencies across different risk factors.
This study maps systemic risks in TradFi and DeFi, highlighting their interdependence.
Since the latest financial crisis, the idea of systemic risk has received considerable interest. In particular, contagion effects arising from cross-holdings between interconnected financial firms have been studied extensively. Drawing inspiration from the field of complex networks, these attempts are largely unaware o…
Network theory assesses systemic risk in the insurance sector.
Reconstructing patterns of interconnections from partial information is one of the most important issues in the statistical physics of complex networks. A paramount example is provided by financial networks. In fact, the spreading and amplification of financial distress in capital markets is strongly affected by the in…
Economic interdependencies have become increasingly present in globalized production, financial and trade systems. While establishing interdependencies among economic agents is crucial for the production of complex products, they may also increase systemic risks due to failure propagation. It is crucial to identify how…
Risk assessment is a major challenge for supply chain managers, as it potentially affects business factors such as service costs, supplier competition and customer expectations. The increasing interconnectivity between organisations has put into focus methods for supply chain cyber risk management. We introduce a gener…
This paper proposes RiskRank as a joint measure of cyclical and cross-sectional systemic risk. RiskRank is a general-purpose aggregation operator that concurrently accounts for risk levels for individual entities and their interconnectedness. The measure relies on the decomposition of systemic risk into sub-components …
The paper examines expectile quadrangle properties in risk management.
Study extends Gai-Kapadia framework to assess systemic risk in global equity markets.
This paper forecasts renewable energy prospects in South America through cross-border interconnection.
The ongoing concern about systemic risk since the outburst of the global financial crisis has highlighted the need for risk measures at the level of sets of interconnected financial components, such as portfolios, institutions or members of clearing houses. The two main issues in systemic risk measurement are the compu…
Paper uses stochastic algorithms to estimate systemic risk measures.
We test the hypothesis that interconnections across financial institutions can be explained by a diversification motive. This idea stems from the empirical evidence of the existence of long-term exposures that cannot be explained by a liquidity motive (maturity or currency mismatch). We model endogenous interconnection…
Recently, there has been a growing interest in network research, especially in these fields of biology, computer science, and sociology. It is natural to address complex financial issues such as the European sovereign debt crisis from the perspective of network. In this article, we construct a network model according t…
The goal of this paper is to study organized flocking behavior and systemic risk in heterogeneous mean-field interacting diffusions. We illustrate in a number of case studies the effect of heterogeneity in the behavior of systemic risk in the system, i.e., the risk that several agents default simultaneously as a result…
This paper uses MIS to identify key financial institutions with minimal risk contagion.
Modeling bank leverage dynamics to understand systemic risk in financial markets.
As economic entities become increasingly interconnected, a shock in a financial network can provoke significant cascading failures throughout the system. To study the systemic risk of financial systems, we create a bi-partite banking network model composed of banks and bank assets and propose a cascading failure model …
Proposes a regularization approach to model German power derivative market, identifying significant risk spillovers.
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…
Compound examines decentralized lending users and their short loan durations.
EM-GAN uses GANs for fast stress analysis of multi-segment interconnects.
The policy objective of safeguarding financial stability has stimulated a wave of research on systemic risk analytics, yet it still faces challenges in measurability. This paper models systemic risk by tapping into expert knowledge of financial supervisors. We decompose systemic risk into a number of interconnected seg…
The global financial system can be represented as a large complex network in which banks, hedge funds and other financial institutions are interconnected to each other through visible and invisible financial linkages. Recently, a lot of attention has been paid to the understanding of the mechanisms that can lead to a b…
This paper optimizes cybersecurity resource allocation in networks with heterogeneous attacker and defender valuations.
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…
A growing body of studies on systemic risk in financial markets has emphasized the key importance of taking into consideration the complex interconnections among financial institutions. Much effort has been put in modeling the contagion dynamics of financial shocks, and to assess the resilience of specific financial ma…
Cryptocurrencies are becoming more linked in their returns and volatilities.
Much research in systemic risk is focused on default contagion. While this demands an understanding of valuation, fewer articles specifically deal with the existence, the uniqueness, and the computation of equilibrium prices in structural models of interconnected financial systems. However, beyond contagion research, t…
This paper uses graph neural networks to predict SME default risk using transaction and ownership networks.
We present a dialogue on Funding Costs and Counterparty Credit Risk modeling, inclusive of collateral, wrong way risk, gap risk and possible Central Clearing implementation through CCPs. This framework is important following the fact that derivatives valuation and risk analysis has moved from exotic derivatives managed…
The introduction of CCPs in most derivative transactions will dramatically change the landscape of derivatives pricing, hedging and risk management, and, according to the TABB group, will lead to an overall liquidity impact about 2 USD trillions. In this article we develop for the first time a comprehensive approach fo…
In this paper, we study the non-linear diffusion equation associated with a particle system where the common drift depends on the rate of absorption of particles at a boundary. We provide an interpretation as a structural credit risk model with default contagion in a large interconnected banking system. Using the metho…
A modern version of Monetary Circuit Theory with a particular emphasis on stochastic underpinning mechanisms is developed. It is explained how money is created by the banking system as a whole and by individual banks. The role of central banks as system stabilizers and liquidity providers is elucidated. It is shown how…
This paper develops a new portfolio optimization framework that considers network spillovers.
The latest financial crisis has painfully revealed the dangers arising from a globally interconnected financial system. Conventional approaches based on the notion of the existence of equilibrium and those which rely on statistical forecasting have seen to be inadequate to describe financial systems in any reasonable w…
Study measures risk spillovers between US and China's agricultural futures markets.
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' …
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…
CoCos can increase financial fragility in certain network structures.
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 …
New framework for 3D spatial topology enumeration and identification.