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Artikel von Paolo Tasca
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Managing Risk under the Blockchain Paradigm
Managing Risk under the Blockchain Paradigm
Von Paolo Tasca
Aktivitäten
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Nikhil Vadgama participated in an insightful roundtable at the Point Zero Forum in #Zurich, where moderated by Alessandra Perrazzelli on "Navigating…
Nikhil Vadgama participated in an insightful roundtable at the Point Zero Forum in #Zurich, where moderated by Alessandra Perrazzelli on "Navigating…
Beliebt bei Paolo Tasca
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A lively debate at the UK Centre for Blockchain Technologies seminar series in London, discussing decentralized finance with a focus on AMM…
A lively debate at the UK Centre for Blockchain Technologies seminar series in London, discussing decentralized finance with a focus on AMM…
Beliebt bei Paolo Tasca
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I'm honored to be among the top three finalists for the Education Excellence Awards 2024 in the Innovation and Impact category. This award…
I'm honored to be among the top three finalists for the Education Excellence Awards 2024 in the Innovation and Impact category. This award…
Beliebt bei Paolo Tasca
Berufserfahrung und Ausbildung
Veröffentlichungen
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Enabling the Internet of Value
Springer
This book shows how blockchain technology can transform the Internet, connecting global businesses in disruptive ways. It offers a comprehensive and multi-faceted examination of the potential of distributed ledger technology (DLT) from a new perspective: as an enabler of the Internet of Value (IoV).
The authors discuss applications of blockchain technology to the financial services domain, e.g. in real estate, insurance and the emerging Decentralised Finance (DeFi) movement. They also…This book shows how blockchain technology can transform the Internet, connecting global businesses in disruptive ways. It offers a comprehensive and multi-faceted examination of the potential of distributed ledger technology (DLT) from a new perspective: as an enabler of the Internet of Value (IoV).
The authors discuss applications of blockchain technology to the financial services domain, e.g. in real estate, insurance and the emerging Decentralised Finance (DeFi) movement. They also cover applications to the media and e-commerce domains. DLT’s impacts on the circular economy, marketplace, Internet of Things (IoT) and oracle business models are also investigated. In closing, the book provides outlooks on the evolution of DLT, as well as the systemic governance and privacy risks of the IoV.
The book is intended for a broad readership, including students, researchers and industry practitioners.Andere Autor:innenVeröffentlichung anzeigen -
A Taxonomy of Blockchain Technologies: Principles of Identification and Classification
Ledger
A comparative study across the most widely known blockchain technologies is conducted with a bottom-up approach. Blockchains are deconstructed into their building blocks. Each building block is then hierarchically classified into main and subcomponents. Then, varieties of the subcomponents are identified and compared. A taxonomy tree is used to summarise the study and provide a navigation tool across different blockchain architectural configurations.
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Risks and Challenges of Initial Coin offerings
Journal of Digital Banking
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Dynamic Interaction Between Asset Prices and Bank Behavior: A Systemic Risk Perspective
Computational Economics
We propose a simple model to simulate an interaction between banks and a financial market. In our model, banks are exposed to two sources of risks: market risk from their investments in assets external to the banking system and credit risk from lending in the interbank market. By and large, both risks increase during severe financial turmoil. In this scenario, the paper shows the conditions under which individual and the systemic defaults tend to coincide. This paper attempts to conduct a…
We propose a simple model to simulate an interaction between banks and a financial market. In our model, banks are exposed to two sources of risks: market risk from their investments in assets external to the banking system and credit risk from lending in the interbank market. By and large, both risks increase during severe financial turmoil. In this scenario, the paper shows the conditions under which individual and the systemic defaults tend to coincide. This paper attempts to conduct a numerical simulation of banking ecosystems by using the actual values of financial items extracted from 89 Japanese banks’ balance sheets. From this numerical simulation, we confirm two points: (1) when financial market prices decrease due to crashes in a trend-followers-dominant market, banks lose their net worth coincidentally. Thus, the capital adequacy ratio decreases synchronously, and any bank may not provide other banks with money through the interbank markets. (2) In a contrarians-dominant or contrarians-predominant market, we observed mean-reverting fluctuations in market prices. Bankruptcies happen asynchronously, and market prices eventually decrease. However, other banks may provide the bank suffering from a shortage of assets with money through the interbank markets. We further compare the characteristics of the banking system in four types of market modes.
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The challenges faced by blockchain technologies — Part 2
Journal of Digital Banking
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The challenges faced by blockchain technologies – Part 1
Journal of Digital Banking
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Blockchain Technologies: The Foreseeable Impact on Society and Industry
IEEE Computer and Society
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Portfolio Diversification and Systemic Risk in Interbank Network
Journal of Economic Dynamics and Control
This paper contributes to a growing literature on the ambiguous effects of risk diversification. In our model, banks hold claims on each other’s liabilities that are marked-to-market on the individual financial leverage of the obligor. The probability of systemic default is determined using a passage-problem approach in a network context and banks are able to internalize the network externalities of contagion through their holdings. Banks do not internalize the social costs to the real economy…
This paper contributes to a growing literature on the ambiguous effects of risk diversification. In our model, banks hold claims on each other’s liabilities that are marked-to-market on the individual financial leverage of the obligor. The probability of systemic default is determined using a passage-problem approach in a network context and banks are able to internalize the network externalities of contagion through their holdings. Banks do not internalize the social costs to the real economy of a systemic default of the banking system. We investigate the optimal diversification strategy of banks in the face of opposite and persistent economic trends that are ex-ante unknown to banks. We find that the optimal level of risk diversification may be interior or extremal depending on banks exposure the external assets and that a tension arises whereby individual incentives favor a banking system that is over-diversified with respect to the level of diversification that is desirable in the social optimum.
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The Evolution of the Bitcoin Economy: Extracting and Analyzing the Network of Payment Relationships
SSRN WP http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2808762
In this paper, we gather together the minimum units of Bitcoin identity (the individual addresses), and group them into approximations of business entities, what we call “super clusters”. While these clusters can remain largely anonymous, we are able to ascribe many of them to particular business categories by analyzing some of their specific transaction patterns, as observed during the period from 2009-2015. We are then able to extract and create a map of the network of payment relationships…
In this paper, we gather together the minimum units of Bitcoin identity (the individual addresses), and group them into approximations of business entities, what we call “super clusters”. While these clusters can remain largely anonymous, we are able to ascribe many of them to particular business categories by analyzing some of their specific transaction patterns, as observed during the period from 2009-2015. We are then able to extract and create a map of the network of payment relationships among them, and analyze transaction behavior found in each business category. We conclude by identifying three marked regimes that have evolved as the Bitcoin economy has grown and matured: from an early prototype stage; to a second growth stage populated in large part with “sin” enterprise (i.e., gambling, black markets); to a third stage marked by a sharp progression away from “sin” and toward legitimate enterprises.
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How Does P2P Lending Fit into the Consumer Credit Market?
Why do retail consumers look for P2P financial intermediation? Are internet-based peer-to-peer (P2P) loans a substitute for or a complement to bank loans? In this study we answer these questions by comparing P2P lending with the non-construction consumer credit market in Germany. We show that P2P lending is servicing a slice of the consumer credit market neglected by banks, namely high-risk and small-sized loans. Nevertheless, when accounting for the risk differential, interest rates are very…
Why do retail consumers look for P2P financial intermediation? Are internet-based peer-to-peer (P2P) loans a substitute for or a complement to bank loans? In this study we answer these questions by comparing P2P lending with the non-construction consumer credit market in Germany. We show that P2P lending is servicing a slice of the consumer credit market neglected by banks, namely high-risk and small-sized loans. Nevertheless, when accounting for the risk differential, interest rates are very similar. Our conclusion is that P2P lending is substituting the banking sector for high-risk consumer loans since banks are unwilling or unable to supply this slice of the market. Our study serves to show where the institutionalization of credit provision has left a slice of the market unsupplied.
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Digital Currencies: Principles, Trends, Opportunities, and Risks
ECUREX Research Working Paper
The report describes the ongoing innovations in the financial sector brought about by digital currencies from a multi-level perspective: systemic, technical, legal, and industrial. The report extensively covers the current trends in the domain, in order to give the reader a quantitative understanding of the potential opportunities and risks arising from the global adoption of dig- ital currencies.
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Bitcoin and the PPP Puzzle
This paper approaches the PPP puzzle by using the Bitcoin/US Dollar exchange rate. The use of the virtual currency as macroeconomic laboratory allows us to remove frictions that previously impeded the empirical demonstration of the law of one price. We show that price adjustments are still far from perfect due to information asymmetry between agents. Nevertheless, the real exchange rate is stationary and adjusts by 81% within one day. Finally, because of the different speed of information…
This paper approaches the PPP puzzle by using the Bitcoin/US Dollar exchange rate. The use of the virtual currency as macroeconomic laboratory allows us to remove frictions that previously impeded the empirical demonstration of the law of one price. We show that price adjustments are still far from perfect due to information asymmetry between agents. Nevertheless, the real exchange rate is stationary and adjusts by 81% within one day. Finally, because of the different speed of information spread, good market arbitrage takes place in the Bitcoin economy but not in the US economy. Thus, we conclude that in a frictionless economy the PPP holds and the speed of arbitrage for the good market depends on the speed of information spread among agents.
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Overlapping Correlation Coefficient
ETH-RC-13-004
This paper provides a mapping from portfolio risk diversification into the pairwise correlation between portfolios. In a finite market of uncorrelated assets, portfolio risk is reduced by increasing diversification. However, higher the diversification level, the greater is the overlap between portfolios. The overlap, in turn, leads to greater correlation between portfolios.
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Quantifying the Impact of Leveraging and Diversification on Systemic Risk
Journal of Financial Stability (2014) forthcoming
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be considered independent. Based on the structural framework by Merton (1974), we discuss a model in which these correlations arise from overlaps in banks' portfolios. Portfolio diversification is used as a strategy to mitigate losses from investments in risky…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be considered independent. Based on the structural framework by Merton (1974), we discuss a model in which these correlations arise from overlaps in banks' portfolios. Portfolio diversification is used as a strategy to mitigate losses from investments in risky projects. We calculate an optimal level of diversification that has to be reached for a given level of excessive leverage to still mitigate an increase in systemic risk. In our model, this optimal diversification further depends on the market size and the market conditions (e.g. volatility). It allows to distinguish between a safe regime, in which excessive leverage does not result in an increase of systemic risk, and a risky regime, in which excessive leverage cannot be mitigated leading to an increased systemic risk. Our results are of relevance for financial regulators.
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Market Procyclicality and Systemic Risk
ETH Risk Center, ETH-RC-12-012
We model the systemic risk associated with the so-called balance-sheet amplification mechanism in a system of banks with interlocked balance sheets and with positions in real-economy-related assets. Our modeling framework integrates a stochastic price dynamics with an active balance-sheet management aimed to maintain the Value-at-Risk at a target level. We find that a strong compliance with capital requirements, usually alleged to be procyclical, does not increase systemic risk unless the asset…
We model the systemic risk associated with the so-called balance-sheet amplification mechanism in a system of banks with interlocked balance sheets and with positions in real-economy-related assets. Our modeling framework integrates a stochastic price dynamics with an active balance-sheet management aimed to maintain the Value-at-Risk at a target level. We find that a strong compliance with capital requirements, usually alleged to be procyclical, does not increase systemic risk unless the asset market is illiquid. Conversely, when the asset market is illiquid, even a weak compliance with capital requirements increases significantly systemic risk. Our findings have implications in terms of possible macro-prudential policies to mitigate systemic risk.
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DebtRank: Too Central to Fail? Financial Networks, the FED and Systemic Risk
NATURE Sci. Rep.
Systemic risk, here meant as the risk of default of a large portion of the financial system, depends on the network of financial exposures among institutions. However, there is no widely accepted methodology to determine the systemically important nodes in a network. To fill this gap, we introduce, DebtRank, a novel measure of systemic impact inspired by feedback-centrality. As an application, we analyse a new and unique dataset on the USD 1.2 trillion FED emergency loans program to global…
Systemic risk, here meant as the risk of default of a large portion of the financial system, depends on the network of financial exposures among institutions. However, there is no widely accepted methodology to determine the systemically important nodes in a network. To fill this gap, we introduce, DebtRank, a novel measure of systemic impact inspired by feedback-centrality. As an application, we analyse a new and unique dataset on the USD 1.2 trillion FED emergency loans program to global financial institutions during 2008–2010. We find that a group of 22 institutions, which received most of the funds, form a strongly connected graph where each of the nodes becomes systemically important at the peak of the crisis. Moreover, a systemic default could have been triggered even by small dispersed shocks. The results suggest that the debate on too-big-to-fail institutions should include the even more serious issue of too-central-to-fail.
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Diversification and Financial Stability
CCSS Working Paper Series
The recent credit crisis of 2007/08 has raised a debate about the so-called knife-edge properties of financial markets. The paper contributes to the debate shedding light on the controversial relation between risk-diversification and financial stability. We model a financial network where assets held by borrowers to meet their obligations, include claims against other borrowers and securities exogenous to the network. The balance-sheet approach is conjugated with a stochastic setting and by a…
The recent credit crisis of 2007/08 has raised a debate about the so-called knife-edge properties of financial markets. The paper contributes to the debate shedding light on the controversial relation between risk-diversification and financial stability. We model a financial network where assets held by borrowers to meet their obligations, include claims against other borrowers and securities exogenous to the network. The balance-sheet approach is conjugated with a stochastic setting and by a mean-field approximation the law of motion of the system's fragility is derived. We show that diversification has an ambiguous effect and beyond a certain levels elicits financial instability. Moreover, we find that risk-sharing restrictions create a socially preferable outcome. Our findings have significant implications for future policy recommendation.
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Organisationen
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American Finance Association
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European Finance Association
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SUERF
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Weitere Aktivitäten von Paolo Tasca
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What an amazing CBER-CDFT-DSF Blockchain Economics Summer School at Columbia Engineering in New York. The final day included: - Fahad Saleh from…
What an amazing CBER-CDFT-DSF Blockchain Economics Summer School at Columbia Engineering in New York. The final day included: - Fahad Saleh from…
Beliebt bei Paolo Tasca
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Back in the #UAE after a productive week in #Japan. Great to re-connect with investors, partners and colleagues in Tokyo and to discuss the growing…
Back in the #UAE after a productive week in #Japan. Great to re-connect with investors, partners and colleagues in Tokyo and to discuss the growing…
Beliebt bei Paolo Tasca
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I’m excited - and proud - to share the 2023 #RippleImpact Report! Ripple's commitment to sustainability, financial inclusion, blockchain research and…
I’m excited - and proud - to share the 2023 #RippleImpact Report! Ripple's commitment to sustainability, financial inclusion, blockchain research and…
Beliebt bei Paolo Tasca
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It started at the Al Qudra cycle track in Dubai on New Year’s Eve some 6 months ago. The group of wonderful people and real athletes I had just been…
It started at the Al Qudra cycle track in Dubai on New Year’s Eve some 6 months ago. The group of wonderful people and real athletes I had just been…
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A thought-provoking day at the CBER-CDFT-DSF Blockchain Economics Summer School at Columbia Engineering in New York. Stimulating presentations…
A thought-provoking day at the CBER-CDFT-DSF Blockchain Economics Summer School at Columbia Engineering in New York. Stimulating presentations…
Beliebt bei Paolo Tasca
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Join us for a Lunch and Learn featuring Vytautas Vito Tumas, PhD from Ripple on #AMM on XRP Ledger (De-fi) at UCL. Register…
Join us for a Lunch and Learn featuring Vytautas Vito Tumas, PhD from Ripple on #AMM on XRP Ledger (De-fi) at UCL. Register…
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#UBRI Connect breakfast focusing on Bridging Research With Entrepreneurship was a great way to kick off #APEX in #Amsterdam! The session featured…
#UBRI Connect breakfast focusing on Bridging Research With Entrepreneurship was a great way to kick off #APEX in #Amsterdam! The session featured…
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🌟 What an amazing event! Proof of Talks by X Ventures in Paris was undoubtedly the best of Europe! Huge congratulations to the X Ventures team!…
🌟 What an amazing event! Proof of Talks by X Ventures in Paris was undoubtedly the best of Europe! Huge congratulations to the X Ventures team!…
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#Consensus2024 Day 1 Schedule 🗓️ : The Hedera team and our ecosystem partners are all set up at the booth ready to connect with the #web3…
#Consensus2024 Day 1 Schedule 🗓️ : The Hedera team and our ecosystem partners are all set up at the booth ready to connect with the #web3…
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