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Failure statistics of banks in the US show that their sizes are highly unequal (ranging from a few tens of thousands to over a billion dollars) and also, they come in `waves' of intermittent activities. This motivates a self-organized…
In this paper we introduce a generalized extension of the Eisenberg-Noe model of financial contagion to allow for time dynamics of the interbank liabilities, including a dynamic examination of default risk. This framework separates the cash…
This paper introduces forward-looking measures of the network connectedness of fears in the financial system, arising due to the good and bad beliefs of market participants about uncertainty that spreads unequally across a network of banks.…
Whereas traditional credit scoring tends to employ only individual borrower- or loan-level predictors, it has been acknowledged for some time that connections between borrowers may result in default risk propagating over a network. In this…
The seniority of debt, which determines the order in which a bankrupt institution repays its debts, is an important and sometimes contentious feature of financial crises, yet its impact on system-wide stability is not well understood. We…
Information is a valuable asset for agents in socio-economic systems, a significant part of the information being entailed into the very network of connections between agents. The different interlinkages patterns that agents establish may,…
Financial networks are dynamic. To assess their systemic importance to the world-wide economic network and avert losses we need models that take the time variations of the links and nodes into account. Using the methodology of classical…
Is transparency always beneficial in complex systems such as traffic networks and stock markets? How is transparency defined in multi-agent systems, and what is its optimal degree at which social welfare is highest? We take an agent-based…
Lending protocols are one of the main applications of Decentralized Finance (DeFi), enabling crypto-assets loan markets with a total value estimated in the tens of billions of dollars. Unlike traditional lending systems, these protocols…
A major requirement for credit scoring models is to provide a maximally accurate risk prediction. Additionally, regulators demand these models to be transparent and auditable. Thus, in credit scoring, very simple predictive models such as…
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…
A financial system contains many elements networked by their relationships. Extensive works show that topological structure of the network stores rich information on evolutionary behaviors of the system such as early warning signals of…
The theory of multilayer networks is in its early stages, and its development provides vital methods for understanding complex systems. Multilayer networks, in their multiplex form, have been introduced within the last three years to…
Empirical measures of financial connectedness based on Forecast Error Variance Decompositions (FEVDs) often yield dense network structures that obscure true transmission channels and complicate the identification of systemic risk. This…
This paper proposes RiskRank as a joint measure of cyclical and cross-sectional systemic risk. RiskRank is a general-purpose aggregation operator that concurrently accounts for risk levels for individual entities and their…
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…
In order to scale transaction rates for deployment across the global web, many cryptocurrencies have deployed so-called "Layer-2" networks of private payment channels. An idealized payment network behaves like a Credit Network, a model for…
We show that any objective risk measurement algorithm mandated by central banks for regulated financial entities will result in more risk being taken on by those financial entities than would otherwise be the case. Furthermore, the risks…
Sustainable financial markets play an important role in the functioning of human society. Still, the detection and prediction of risk in financial markets remain challenging and draw much attention from the scientific community. Here we…
Interconnected autonomous systems often share security risks. However, an autonomous system lacks the incentive to make (sufficient) security investments if the cost exceeds its own benefit even though doing that would be socially…