Related papers: A primer on reflexivity and price dynamics under s…
Opinions and beliefs determine the evolution of social systems. This is of particular interest in finance, as the increasing complexity of financial systems is coupled with information overload. Opinion formation, therefore, is not always…
When studying social, economic and biological systems, one has often access to only limited information about the structure of the underlying networks. An example of paramount importance is provided by financial systems: information on the…
We introduce a simple model for addressing the controversy in the study of financial systems, sometimes taken as brownian-like processes and other as critical systems with fluctuations of arbitrary magnitude. The model considers a…
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…
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…
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…
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…
The global financial system has become highly connected and complex. Has been proven in practice that existing models, measures and reports of financial risk fail to capture some important systemic dimensions. Only lately, advisory boards…
An asset pricing model using long-run capital share growth risk has recently been found to successfully explain U.S. stock returns. Our paper adopts a recursive preference utility framework to derive an heterogeneous asset pricing model…
Weighted reciprocity between two agents can be defined as the minimum of sending and receiving value in their bilateral relationship. In financial networks, such reciprocity characterizes the importance of individual banks as both liquidity…
We develop a dynamic model of cascading failures in a financial network whereby cross-holdings are viewed as feedback, external assets investments as inputs and failure penalties as static nonlinearities. We provide sufficient milder and…
Research capacity is critical in understanding systemic risk and informing new regulation. Banking regulation has not kept pace with all the complexities of financial innovation. The academic literature on systemic risk is rapidly…
The paper presents a step forward into the development of the theory of meaning. Stock and financial markets are examined from communication-theoretical perspective on the dynamics of information and meaning. This study focuses on the link…
Bank crisis is challenging to define but can be manifested through bank contagion. This study presents a comprehensive framework grounded in nonlinear time series analysis to identify potential early warning signals (EWS) for impending…
Previous studies of the stock price response to trades focused on the dynamics of single stocks, i.e. they addressed the self-response. We empirically investigate the price response of one stock to the trades of other stocks in a correlated…
We introduce an autoregressive-type model of prices in financial market taking into account the self-modulation effect. We find that traders are mainly using strategies with weighted feedbacks of past prices. These feedbacks are responsible…
Aggregated phenomena in social sciences and economics are highly dependent on the way individuals interact. To help understanding the interplay between socio-economic activities and underlying social networks, this paper studies a…
We study how the phenomenon of contagion can take place in the network of the world's stock exchanges due to the behavioral trait "blindeness to small changes". On large scale individual, the delay in the collective response may…
We address a fundamental problem that is systematically encountered when modeling complex systems: the limitedness of the information available. In the case of economic and financial networks, privacy issues severely limit the information…
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…