Spin Glass Model of Operational Risk

TL;DR

This paper models operational risk using a spin glass framework, exploring various dynamic regimes, robustness, limit cycles, and asymptotic behaviors to understand complex risk phenomena.

Contribution

It introduces a novel spin glass model for operational risk, analyzing its dynamic regimes and stability properties.

Findings

System is robust against parameter variations

Presence of limit cycles identified

Asymptotic states characterized

Abstract

We analyze operational risk in terms of a spin glass model. Several regimes are investigated, as a functions of the parameters that characterize the dynamics. The system is found to be robust against variations of these parameters. We unveil the presence of limit cycles and scrutinize the features of the asymptotic state.