https://www.ml-quant.com/topics/risk-credit-banking/Credit risk, default prediction, banking, systemic risk and risk measures. en https://www.ml-quant.com/papers/arxiv/2609.27785/https://www.ml-quant.com/papers/arxiv/2609.27785/Fri, 25 Sep 2026 07:00:00 +0000Proposes semi-discrete optimal transport to capture heavy tails in financial returns, maintaining stable tail ratio estimates across diverse neural generators when standard Lipschitz methods fail. https://www.ml-quant.com/papers/arxiv/2609.25542/https://www.ml-quant.com/papers/arxiv/2609.25542/Fri, 25 Sep 2026 07:00:00 +0000A dual-perspective graph neural network framework predicts corporate defaults from buyer-seller transaction networks, improving approval rates by 7-11 percentage points without increasing default risk. https://www.ml-quant.com/papers/arxiv/2609.23768/https://www.ml-quant.com/papers/arxiv/2609.23768/Fri, 25 Sep 2026 07:00:00 +0000Develops a deep learning scheme for optimal stopping under simultaneous model and discount-rate ambiguity, with application to American option valuation under uncertainty. https://www.ml-quant.com/papers/ssrn/7514178/https://www.ml-quant.com/papers/ssrn/7514178/Fri, 25 Sep 2026 07:00:00 +0000High-frequency analysis reveals contractionary forward guidance immediately cuts bank lending, while expansionary guidance produces weak stimulus, driven by binding capital constraints. https://www.ml-quant.com/papers/ssrn/7515879/https://www.ml-quant.com/papers/ssrn/7515879/Fri, 25 Sep 2026 07:00:00 +0000Banks engaged in securitization contract lending more sharply after monetary tightening because their investor base demands higher returns and cuts risk exposure when rates rise. https://www.ml-quant.com/papers/ssrn/7493702/https://www.ml-quant.com/papers/ssrn/7493702/Fri, 25 Sep 2026 07:00:00 +0000Using SEC filings from 2013-2021, the paper finds hedge fund returns show heterogeneous sensitivity to interest rates, with effects varying by strategy, leverage, and derivative exposure. https://www.ml-quant.com/papers/ssrn/7493706/https://www.ml-quant.com/papers/ssrn/7493706/Fri, 25 Sep 2026 07:00:00 +0000Combining quantile-connectedness, tail-risk measures, and network analysis, the research shows tail connectedness exceeds median levels and lower-tail effects persist longer, with the VIX alone reliably predicting next-week systemic risk. https://www.ml-quant.com/papers/ssrn/7489554/https://www.ml-quant.com/papers/ssrn/7489554/Fri, 25 Sep 2026 07:00:00 +0000Japan's 2016 negative-rate policy reduced lending from low-profitability banks holding reserves, consistent with lower expected returns on bank assets rather than deposit-side stress. https://www.ml-quant.com/papers/ssrn/7498599/https://www.ml-quant.com/papers/ssrn/7498599/Fri, 25 Sep 2026 07:00:00 +0000The study develops a time-varying signature asset model for structural credit that improves calibration across CDS maturities and equity option prices, especially for high-yield firms. https://www.ml-quant.com/papers/ssrn/7502204/https://www.ml-quant.com/papers/ssrn/7502204/Fri, 25 Sep 2026 07:00:00 +0000Analysis of 284 distressed exchanges from 2009-2022 reveals over 50% of firms face subsequent default, with large illiquid creditors trapped in a prisoner's dilemma explaining high acceptance rates. https://www.ml-quant.com/papers/repec/cpr-ceprdp-21268/https://www.ml-quant.com/papers/repec/cpr-ceprdp-21268/Fri, 25 Sep 2026 07:00:00 +0000A nonlinear factor constructed from credit spreads and equity volatility prices global corporate bond returns, explaining up to 13% of three-month-ahead return variation across markets. https://www.ml-quant.com/papers/repec/boe-boeewp-023260/https://www.ml-quant.com/papers/repec/boe-boeewp-023260/Fri, 25 Sep 2026 07:00:00 +0000UK firm survey data validates that external borrowers face larger cost-of-capital increases and cut investment more than internal funders when rates rise, accounting for a quarter of monetary policy's total effect. https://www.ml-quant.com/papers/repec/nbr-nberwo-35607/https://www.ml-quant.com/papers/repec/nbr-nberwo-35607/Fri, 25 Sep 2026 07:00:00 +0000Analysis of 550 million US credit card accounts shows that despite high charge-off rates, card lenders earn 1.5% alpha and 6.8% return on assets through pricing power and non-interest income. https://www.ml-quant.com/papers/repec/nbr-nberwo-35504/https://www.ml-quant.com/papers/repec/nbr-nberwo-35504/Fri, 25 Sep 2026 07:00:00 +0000A database of 3,984 historical US bank runs shows runs are more likely in weak banks but often occur in strong banks; failures concentrate in fundamentally weak institutions. https://www.ml-quant.com/papers/repec/cpr-ceprdp-20158/https://www.ml-quant.com/papers/repec/cpr-ceprdp-20158/Fri, 25 Sep 2026 07:00:00 +0000The study measures liquidity risk from solvency hedging in sterling repo and swaps, finding that pre-crisis LASH risk predicted pension fund bond sales during the 2022 UK market stress. https://www.ml-quant.com/papers/repec/cpr-ceprdp-20100/https://www.ml-quant.com/papers/repec/cpr-ceprdp-20100/Fri, 25 Sep 2026 07:00:00 +0000Analysis of 20 years of US junk bonds and emerging market sovereign debt reveals surprisingly similar average returns, Sharpe ratios, default frequencies, and haircuts across the two asset classes. https://www.ml-quant.com/papers/repec/zbw-bubdps-343110/https://www.ml-quant.com/papers/repec/zbw-bubdps-343110/Fri, 25 Sep 2026 07:00:00 +0000Expansionary central bank collateral policy surprises reduce bank default risk and volatility while compressing government bond spreads, transmitting effects distinctly from asset purchases. https://www.ml-quant.com/papers/repec/cpr-ceprdp-21095/https://www.ml-quant.com/papers/repec/cpr-ceprdp-21095/Fri, 25 Sep 2026 07:00:00 +0000Dutch pension funds use interest rate swaps more aggressively when underfunded, exposing themselves to margin calls exceeding 6% of assets and forcing procyclical sales of government bonds. https://www.ml-quant.com/papers/repec/ecb-ecbwps-20263252/https://www.ml-quant.com/papers/repec/ecb-ecbwps-20263252/Fri, 25 Sep 2026 07:00:00 +0000The study develops a general equilibrium model of financial intermediation showing that liquidity regulation alone cannot achieve efficient allocations and requires complementary policies like bank size limits. https://www.ml-quant.com/papers/repec/dnb-dnbwpp-868/https://www.ml-quant.com/papers/repec/dnb-dnbwpp-868/Fri, 25 Sep 2026 07:00:00 +0000European banks with assets exceeding half of home GDP enjoy at least 30 percent lower credit spreads, and this implicit subsidy persists and depends on sovereign fiscal strength. https://www.ml-quant.com/papers/arxiv/2604.10657/https://www.ml-quant.com/papers/arxiv/2604.10657/Thu, 16 Apr 2026 07:00:00 +0000A New Measure: The article introduces the Lambda extension of Rényi entropic value-at-risk (Λ-EVaR), a new risk measure designed for better risk management by allowing adjustable confidence levels and sensitivity to higher moments. https://www.ml-quant.com/papers/arxiv/2603.13942/https://www.ml-quant.com/papers/arxiv/2603.13942/Thu, 16 Apr 2026 07:00:00 +0000Recent AI advancements are enhancing financial automation by creating integrated systems that use autonomous agents for better decision-making and processing, highlighting the need for effective agent governance. https://www.ml-quant.com/papers/arxiv/2511.04198/https://www.ml-quant.com/papers/arxiv/2511.04198/Thu, 16 Apr 2026 07:00:00 +0000A mean-field model simplifies complex insurance liabilities into manageable solutions, showing that large groups of interdependent individuals can be effectively analyzed in both life and non-life insurance scenarios. https://www.ml-quant.com/papers/ssrn/4470421/https://www.ml-quant.com/papers/ssrn/4470421/Sun, 28 Dec 2025 07:00:00 +0000The paper investigates the euro area's banking system's role in transmitting asset price shocks to credit during the Covid-19 crisis, highlighting significant frictions and a decrease in lending related to real estate collateral. https://www.ml-quant.com/papers/ssrn/4478090/https://www.ml-quant.com/papers/ssrn/4478090/Sun, 28 Dec 2025 07:00:00 +0000Subscription-based credit rating agencies may have biases that lead to overly optimistic ratings, complicating conflict resolution. https://www.ml-quant.com/papers/ssrn/4463970/https://www.ml-quant.com/papers/ssrn/4463970/Sun, 28 Dec 2025 07:00:00 +0000It finds that central bank asset purchases during the pandemic led corporate bond fund managers to take more risks, affecting market stability. https://www.ml-quant.com/papers/ssrn/4440511/https://www.ml-quant.com/papers/ssrn/4440511/Fri, 19 Dec 2025 07:00:00 +0000The study highlights key financial tools in Romania, like green bonds and loans, which can help transition to a low-carbon economy, with banks playing a major role. https://www.ml-quant.com/papers/arxiv/2512.12334/https://www.ml-quant.com/papers/arxiv/2512.12334/Fri, 19 Dec 2025 07:00:00 +0000The study enhances dynamic Bayesian networks for estimating expected shortfall, revealing that traditional models struggle in tail predictions and proposing methods for better forecasting. https://www.ml-quant.com/papers/arxiv/1903.00631/https://www.ml-quant.com/papers/arxiv/1903.00631/Sun, 14 Dec 2025 07:00:00 +0000An economic agent makes choices to maximize utility by adjusting consumption, investing in safe and risky assets, and insuring against losses on a depreciating good, using a strategy from the Hamilton-Jacobi-Bellman equation. https://www.ml-quant.com/papers/arxiv/2512.06550/https://www.ml-quant.com/papers/arxiv/2512.06550/Sun, 14 Dec 2025 07:00:00 +0000This study analyzes how the market responds to major bank mergers in Japan, finding significant positive abnormal returns and lasting effects, indicating that banks benefit from synergies after merging.