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Why do banks fail? We create a panel covering most commercial banks from 1863 through 2024 to study the history of failing banks in the United States. Failing banks are characterized by rising asset losses, deteriorating solvency, and an…
The dynamic network of relationships among corporations underlies cascading economic failures including the current economic crisis, and can be inferred from correlations in market value fluctuations. We analyze the time dependence of the…
Physical infrastructure systems supply crucial resources to residential, commercial, and industrial activities. These infrastructure systems generally consist of multiple types of infrastructure assets that are interdependent. In the event…
The increasing complexity and interdependency of today's networks highlight the importance of studying network robustness to failure and attacks. Many large-scale networks are prone to cascading effects where a limited number of initial…
In this paper the interactions between component failures are quantified and the interaction matrix and interaction network are obtained. The quantified interactions can capture the general propagation patterns of the cascades from…
The insufficient understanding of the credit network structure was recognized as a key factor for regulators' underestimation of the destructive systematic risk during the financial crisis that started in 2007. The existing credit network…
The global crisis of 2008 provoked a heightened interest among scientists to study the phenomenon, its propagation and negative consequences. The process of modelling the spread of a virus is commonly used in epidemiology. Conceptually, the…
We derive the default cascade model and the fire-sale spillover model in a unified interdependent framework. The interactions among banks include not only direct cross-holding, but also indirect dependency by holding mutual assets outside…
Systemic financial risk refers to the simultaneous failure or destabilization of multiple financial institutions, often triggered by contagion mechanisms or common exposures to shocks. In this paper, we present a dynamical model of bank…
Threats on the stability of a financial system may severely affect the functioning of the entire economy, and thus considerable emphasis is placed on the analyzing the cause and effect of such threats. The financial crisis in the current…
The understanding of cascading failures in complex systems has been hindered by the lack of realistic large-scale modeling and analysis that can account for variable system conditions. Here, using the North American power grid, we identify,…
Large-scale power blackouts caused by cascading failure are inflicting enormous socioeconomic costs. We study the problem of cascading link failures in power networks modelled by random geometric graphs from a percolation-based viewpoint.…
The 2023 U.S. banking crisis propagated not through direct financial linkages but through a high-frequency, information-based contagion channel. This paper moves beyond exploration analysis to test the "too-similar-to-fail" hypothesis,…
In a network, a local disturbance can propagate and eventually cause a substantial part of the system to fail, in cascade events that are easy to conceptualize but extraordinarily difficult to predict. Here, we develop a statistical…
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 develop a model for contagion in reinsurance networks by which primary insurers' losses are spread through the network. Our model handles general reinsurance contracts, such as typical excess of loss contracts. We show that simpler…
We study cascading failures in a system comprising interdependent networks/systems, in which nodes rely on other nodes both in the same system and in other systems to perform their function. The (inter-)dependence among nodes is modeled…
How, and to what extent, does an interconnected financial system endogenously amplify external shocks? This paper attempts to reconcile some apparently different views emerged after the 2008 crisis regarding the nature and the relevance of…
Interbank deposits (loans and credits) are quite common in banking system all over the world. Such interbank co-operation is profitable for banks but it can also lead to collective financial failures. In this paper we introduce a new model…
This paper studies the consequences of a human-initiated targeted attack on the national electric power system. We consider two kinds of attacks: ($i$) an attack by an adversary that uses a tactical weapon and destroys a large part of the…