Related papers: A framework for analyzing contagion in banking net…
We introduce a probabilistic framework that represents stylized banking networks with the aim of predicting the size of contagion events. Most previous work on random financial networks assumes independent connections between banks, whereas…
In the new field of financial systemic risk, the network of interbank counterparty relationships can be described as a directed random graph. In "cascade models" of systemic risk, this "skeleton" acts as the medium through which financial…
One of the most defining features of the global financial network is its inherent complex and intertwined structure. From the perspective of systemic risk it is important to understand the influence of this network structure on default…
Propagation of balance-sheet or cash-flow insolvency across financial institutions may be modeled as a cascade process on a network representing their mutual exposures. We derive rigorous asymptotic results for the magnitude of contagion in…
We consider a general tractable model for default contagion and systemic risk in a heterogeneous financial network, subject to an exogenous macroeconomic shock. We show that, under some regularity assumptions, the default cascade model…
The aim of this paper is to quantify and manage systemic risk caused by default contagion in the interbank market. We model the market as a random directed network, where the vertices represent financial institutions and the weighted edges…
We introduce a general framework for models of cascade and contagion processes on networks, to identify their commonalities and differences. In particular, models of social and financial cascades, as well as the fiber bundle model, the…
Contagion processes are strongly linked to the network structures on which they propagate, and learning these structures is essential for understanding and intervention on complex network processes such as epidemics and (mis)information…
We present a framework to calculate the cascade size evolution for a large class of cascade models on random network ensembles in the limit of infinite network size. Our method is exact and applies to network ensembles with almost arbitrary…
We develop a structural default model for interconnected financial institutions in a probabilistic framework. For all possible network structures we characterize the joint default distribution of the system using Bayesian network…
We study an extension of Duncan Watts' 2002 model of information cascades in social networks where edge weights are taken to be random, an innovation motivated by recent applications of cascade analysis to systemic risk in financial…
We analyze cascades of defaults in an interbank loan market. The novel feature of this study is that the network structure and the size distribution of banks are derived from empirical data. We find that the ability of a defaulted…
Evaluation of systemic risk in networks of financial institutions in general requires information of inter-institution financial exposures. In the framework of Debt Rank algorithm, we introduce an approximate method of systemic risk…
We study the mean field approximation of a recent model of cascades on networks relevant to the investigation of systemic risk control in financial networks. In the model, the hypothesis of a trend reinforcement in the stochastic process…
This systemic risk paper introduces inhomogeneous random financial networks (IRFNs). Such models are intended to describe parts, or the entirety, of a highly heterogeneous network of banks and their interconnections, in the global financial…
We study contagion and systemic risk in sparse financial networks with balance-sheet interactions on a directed random graph. Each institution has homogeneous liabilities and equity, and exposures along outgoing edges are split equally…
I show the equivalence between a model of financial contagion and the threshold model of global cascades proposed by Watts (2002). The model financial network comprises banks that hold risky external assets as well as interbank assets. It…
As impressively shown by the financial crisis in 2007/08, contagion effects in financial networks harbor a great threat for the stability of the entire system. Without sufficient capital requirements for banks and other financial…
In this paper we estimate the propagation of liquidity shocks through interbank markets when the information about the underlying credit network is incomplete. We show that techniques such as Maximum Entropy currently used to reconstruct…
We consider a model of contagion in financial networks recently introduced in the literature, and we characterize the effect of a few features empirically observed in real networks on the stability of the system. Notably, we consider the…