Mathematical Sciences Department
Financial Math Seminar
Speaker: Weijie Pang, Wentworth Institute of Technology
Thursday, October 3, 2024
3:00 - 4:00 pm
Stratton Hall 205
Title: Netting And Novation in Repo Networks
Abstract: The stability of the financial system is a critical concern. The recent collapse of Silicon Valley Bank and the downgrade of Credit Suisse AG by DBRS Morningstar have sent shockwaves through both the American and global markets. This paper presents an agent-based computational model to analyze the impact of liquidity shortages on a network of interconnected banks. Our model incorporates balance sheets that include fixed and liquid assets, general collateral, unsecured interbank loans, reverse-repo assets, deposits, and liabilities. For acyclic networks, we propose an order-independent solution algorithm (netting and novation) that allows for bank executions in any sequence. We then conduct numerical experiments to explore the behavior of various financial networks under different shock scenarios.
Bio: Weijie Pang is an Assistant Professor in the School of Computing and Data Science at Wentworth Institute of Technology. She earned her Ph.D. from Worcester Polytechnic Institute (WPI) under the supervision of Prof. Stephan Sturm. Following her Ph.D., she completed a postdoctoral fellowship in the Department of Mathematics and Statistics at McMaster University in Canada. Her research interests include Financial Mathematics, Stochastic Analysis, and Pandemic Modeling.