IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2505.07502.html
   My bibliography  Save this paper

Measuring Financial Resilience Using Backward Stochastic Differential Equations

Author

Listed:
  • Roger J. A. Laeven
  • Matteo Ferrari
  • Emanuela Rosazza Gianin
  • Marco Zullino

Abstract

We propose the resilience rate as a measure of financial resilience. It captures the rate at which a dynamic risk evaluation recovers, i.e., bounces back, after the risk-acceptance set is breached. We develop the associated stochastic calculus by establishing representation theorems of a suitable time-derivative of solutions to backward stochastic differential equations (BSDEs) with jumps, evaluated at stopping times. These results reveal that our resilience rate can be represented as an expectation of the generator of the BSDE. We also introduce resilience-acceptance sets and study their properties in relation to both the resilience rate and the dynamic risk measure. We illustrate our results in several examples.

Suggested Citation

  • Roger J. A. Laeven & Matteo Ferrari & Emanuela Rosazza Gianin & Marco Zullino, 2025. "Measuring Financial Resilience Using Backward Stochastic Differential Equations," Papers 2505.07502, arXiv.org.
    • Handle: RePEc:arx:papers:2505.07502
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2505.07502
    File Function: Latest version
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2505.07502. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.