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 increasing integration of world economies, which organize in complex multilayer networks of interactions, is one of the critical factors for the global propagation of economic crises. We adopt the network science approach to quantify shock propagation on the global trade-investment multiplex network. To this aim, w…
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…
Modeling financial contagion through bank networks, revealing solvency correlations.
Network models assume unrealistic idiosyncratic risk, which can be mitigated by allowing for correlated shocks.
We investigate shock-wave solutions of the Einstein equations in the case when the speed of propagation is equal to the speed of light. The work extends the shock matching theory of Smoller and Temple, which characterizes solutions of the Einstein equations when the spacetime metric is only Lipschitz continuous across …
Business cycles tend to comove across countries. However, standard models that attribute comovement to propagation of exogenous shocks struggle to generate a level of comovement that is as high as in the data. In this paper, we consider models that produce business cycles endogenously, through some form of non-linear d…
We consider a dynamical model of distress propagation on complex networks, which we apply to the study of financial contagion in networks of banks connected to each other by direct exposures. The model that we consider is an extension of the DebtRank algorithm, recently introduced in the literature. The mechanics of di…
In the last years, increasing efforts have been put into the development of effective stress tests to quantify the resilience of financial institutions. Here we propose a stress test methodology for central counterparties based on a network characterization of clearing members, whose links correspond to direct credits …
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…
Large scale networks delineating collective dynamics often exhibit cascading failures across nodes leading to a system-wide collapse. Prominent examples of such phenomena would include collapse on financial and economic networks. Intertwined nature of the dynamics of nodes in such network makes it difficult to disentan…
Study extends Gai-Kapadia framework to assess systemic risk in global equity markets.
We review recent work on the Einstein equations of general relativity when the curvature is defined in a weak sense. Weakly regular spacetimes are constructed, in which impulsive gravitational waves, as well as shock waves, propagate.
We reverse engineer dynamics of financial contagion to find the scenario of smallest exogenous shock that, should it occur, would lead to a given final systemic loss. This reverse stress test can be used to identify the potential triggers of systemic events, and it removes the arbitrariness in the selection of shock sc…
Study uses multidimensional SE-NBD process to analyze default portfolios and identify shock amplification.
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…
SOC theory explains financial volatility and economic shocks.
Study models systemic risks in BRICS banks under geopolitical shocks.
Study finds a phase transition in flash crashes involving large and liquid stocks.
In this paper, we perform a comparative segmentation and clustering analysis of the time series for the ten Dow Jones US economic sector indices between 14 February 2000 and 31 August 2008. From the temporal distributions of clustered segments, we find that the US economy took one and a half years to recover from the m…
We present a network-based framework for simulating systemic risk that considers shock propagation in banking systems. In particular, the framework allows the modeller to reflect a top-down framework where a shock to one bank in the system affects the solvency and liquidity position of other banks, through systemic mar…
This work develops an agent-based model for the study of how the leverage through the use of repurchase agreements can function as a mechanism for the propagation and amplification of financial shocks in a financial system. Based on the analysis of financial intermediaries in the repo and interbank lending markets duri…
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…
Threats on the stability of a financial system may severely affect the functioning of the entire economy, and thus considerable emphasis is placed on the analyzing the cause and effect of such threats. The financial crisis in the current and past decade has shown that one important cause of instability in global market…
Model predicts asset prices from initial shocks using neural networks.
Develops a framework to assess systemic risk in the economy using bank-firm network data.
We investigate the initial value problem for the Einstein-Euler equations of general relativity under the assumption of Gowdy symmetry on T3, and we construct matter spacetimes with low regularity. These spacetimes admit, both, impulsive gravitational waves in the metric (for instance, Dirac mass curvature singularitie…
Study shows how sentiment shocks affect equity markets, revealing asymmetries and state-dependent effects.
Study on identifying and inferring nonlinear dynamics on unknown networks.
Study financial contagion and risk in sparse networks with directed edges.
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 …
The 2008 financial crisis illustrated the need for a thorough, functional understanding of systemic risk in strongly interconnected financial structures. Dynamic processes on complex networks being intrinsically difficult, most recent studies of this problem have relied on numerical simulations. Here we report analytic…
Mathematical framework investigates fire sales amplification and stability.
The study reveals asymmetries in US financial shocks' international impacts.
This paper analyzes how banking risks spread through sentiment and policy shocks.
We undertake a fundamental study of network equilibria modeled as solutions of fixed point equations for monotone linear functions with saturation nonlinearities. The considered model extends one originally proposed to study systemic risk in networks of financial institutions interconnected by mutual obligations and is…
Study shows local governments smooth fiscal shocks from property tax revenues.
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…
The study uses Random Matrix Theory to identify structural changes in stock markets during shocks.
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…
This study quantifies systemic importance in global banks using a continuous framework that amplifies localized shocks.
Currency volatility shocks predict lower excess returns, and buying weak transmitters outperforms selling strong ones.
This systemic risk paper introduces inhomogeneous random financial networks (IRFNs). Such models are intended to describe parts, or the entirety, of a highly heterogeneous network of banks and their interconnections, in the global financial system. Both the balance sheets and the stylized crisis behaviour of banks are …
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.
The paper validates a centrality measure for financial networks during financial distress.
Paper addresses unbalanced data in common shock models for loss reserving.
This study assesses how economic shocks affect the efficiency and robustness of international pesticide trade networks.
Reduces complexity of financial contagion dynamics on networks.