We review heterogeneous agent-based models of financial stability and their application in stress tests. In contrast to the mainstream approach, which relies heavily on the rational expectations assumption and focuses on situations where it is possible to compute an equilibrium, this approach...

We model and measure simultaneous large losses of the market value of insurers to understand the impact of shocks on the insurance sector. The downside risk of insurers is explicitly modelled by common and idiosyncratic risk factors. Since reinsurance is important for the capacity of insurers,...

This paper presents a tractable model of non-linear dynamics of market returns using a Langevin approach.Due to non-linearity of an interaction potential, the model admits regimes of both small and large return fluctuations. Langevin dynamics are mapped onto an equivalent quantum mechanical (QM)...

Investors' behavior in the market is highly related to the properties that financial time series capture. Particularly, nowadays the availability of high frequency datasets provides a reliable source for the better understanding of investors' psychology. The main aim of this chapter is to...

During 2017, a few fortunate investors have made a lot of money very quickly on their investment in crypto-currencies, an asset class that did not exist just eight short years ago. But as with other rapidly evolving assets, that often seem too good to be true, the potential soaring profits of...

World leaders have declared the G20 to be the premier forum for economic cooperation. But as its influence and policy agenda has grown, so too has the need to be able to effectively model the G20 and the implications of its policy agenda. The paper introduces the G-Cubed (G20) model: a...

With the onset of the financial turmoil in August 2007, pricing references on the money market interest rates have been shocked. The segment of unsecured deposit transactions, which represent the cornerstone of capital markets, and is used as basis for the setting of money market benchmark...

This paper analyzes the effect of the recent market crash on the international diversification of equity portfolios from the perspective of dependence structure. We use the generalized Pareto distribution to fit the left and the right tail of each return distribution in order to evaluate the...

This paper argues that financial links between agents may lead to the resilience or to the contagion of financial distress. Our model details the real effects of agents' beliefs on the resilience of the economy. When the economy is connected enough, it is subject to an unstable equilibrium. Our...

This paper presents an application of a recently developed approach by Matteson and James (2012) for the analysis of change points in a data set, namely major financial market indices converted to financial return series. The general problem concerns the inference of a change in the distribution...