Related papers: Cascading Failures in Bi-partite Graphs: Model for…
In this paper, we propose a dynamical model to capture cascading failures among interconnected organizations in the global financial system. Failures can take the form of bankruptcies, defaults, and other insolvencies. The network that…
The scope of financial systemic risk research encompasses a wide range of interbank channels and effects, including asset correlation shocks, default contagion, illiquidity contagion, and asset fire sales. This paper introduces a financial…
The 2008 financial crisis illustrated the need for a thorough, functional understanding of systemic risk in strongly interconnected financial structures. Dynamic processes on complex networks being intrinsically difficult, most recent…
We report a study of a stylized banking cascade model investigating systemic risk caused by counter party failure using liabilities and assets to define banks' balance sheet. In our stylized system, banks can be in two states: normally…
Global catastrophic risk events, such as nuclear war, pose a severe threat to the stability of international financial systems. As evidenced by even less severe scenarios like the Great Recession, an economic failure can propagate through…
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…
The latest financial crisis has painfully revealed the dangers arising from a globally interconnected financial system. Conventional approaches based on the notion of the existence of equilibrium and those which rely on statistical…
The global financial system can be represented as a large complex network in which banks, hedge funds and other financial institutions are interconnected to each other through visible and invisible financial linkages. Recently, a lot of…
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…
A new class of probabilistic models for cascading failure propagation in interconnected systems is proposed. The models take into account important characteristics of real systems that are not considered in existing generic approaches.…
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…
Supply chain disruptions constitute an often underestimated risk for financial stability. As in financial networks, systemic risks in production networks arises when the local failure of one firm impacts the production of others and might…
Cascading failure is a potentially devastating process that spreads on real-world complex networks and can impact the integrity of wide-ranging infrastructures, natural systems, and societal cohesiveness. One of the essential features that…
It had been believed in the conventional practice that the risk of a bank going bankrupt is lessened in a straightforward manner by transferring the risk of loan defaults. But the failure of American International Group in 2008 posed a more…
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…
The interconnectedness of financial institutions affects instability and credit crises. To quantify systemic risk we introduce here the PD model, a dynamic model that combines credit risk techniques with a contagion mechanism on the network…
Interbank contagion can theoretically exacerbate losses in a financial system and lead to additional cascade defaults during downturn. In this paper we produce default analysis using both regression and neural network models to verify…
The fragility of financial systems was starkly demonstrated in early 2023 through a cascade of major bank failures in the United States, including the second, third, and fourth largest collapses in the US history. The highly interdependent…
This chapter reviews key contributions of complexity science to the study of systemic risk in financial systems. The focus is on network models of financial contagion, where I explore various mechanisms of shock propagation, such as…
A simple banking network model is proposed which features multiple waves of bank defaults and is analytically solvable in the limiting case of an infinitely large homogeneous network. The model is a collection of nodes representing…