In this paper, we study the implications of diversification in the asset portfolios of banks for financial stability and systemic risk. Adding to the existing literature, we analyse this issue in a network model of the interbank market. We carry out a simulation study that determines the...

Abstract In this paper we study parameter estimation via the Expectation Maximization (EM) algorithm for a continuous-time hidden Markov model with diffusion and point process observation. Inference problems of this type arise for instance in credit risk modelling. A key step in the application...

In this paper we consider the range of prices consistent with no arbitrage for European options in a general stochastic volatility model. We give conditions under which infimum respectively the supremum of the possible option prices are equal to the intrinsic value of the option or to the...