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DY: Fachverband Dynamik und Statistische Physik

DY 28: Extreme Events

DY 28.6: Vortrag

Donnerstag, 3. April 2014, 11:00–11:15, ZEU 146

Extreme risks in financial markets - a random matrix approach — Thilo Schmitt, Desislava Chetalova, •Rudi Schäfer, and Thomas Guhr — Fakultät für Physik, Universität Duisburg-Essen

The instability of the financial system as experienced in recent years and in previous periods is often linked to credit defaults, i.e., to the failure of obligors to make promised payments. Given the large number of credit contracts, this problem is amenable to be treated with approaches developed in statistical physics. We introduce the idea of ensemble averaging and thereby uncover generic features of credit risk. We then show that the often advertised concept of diversification, i.e., reducing the risk by distributing it, is deeply flawed when it comes to credit risk. The risk of extreme losses remain due to the ever present correlations, implying a substantial and persistent intrinsic danger to the financial system.