Related papers: Double Cascade Model of Financial Crises
Groups of enterprises can serve as guarantees for one another and form complex networks when obtaining loans from commercial banks. During economic slowdowns, corporate default may spread like a virus and lead to large-scale defaults or…
Network theory proved recently to be useful in the quantification of many properties of financial systems. The analysis of the structure of investment portfolios is a major application since their eventual correlation and overlap impact the…
The modeling of the probability of joint default or total number of defaults among the firms is one of the crucial problems to mitigate the credit risk since the default correlations significantly affect the portfolio loss distribution and…
We analyze how interdependencies between organizations in financial networks can lead to multiple possible equilibrium outcomes. A multiplicity arises if and only if there exists a certain type of dependency cycle in the network that allows…
We propose a model and an estimation technique to distinguish systemic risk and contagion in credit risk. The main idea is to assume, for a set of $d$ obligors, a set of $d$ idiosyncratic shocks and a shock that triggers the default of all…
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…
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…
Interbank lending and borrowing occur when financial institutions seek to settle and refinance their mutual positions over time and circumstances. This interactive process involves money creation at the aggregate level. Coordination…
There is empirical evidence from a range of disciplines that as the connectivity of a network increases, we observe an increase in the average fitness of the system. But at the same time, there is an increase in the proportion of…
We live in a modern world supported by large, complex networks. Examples range from financial markets to communication and transportation systems. In many realistic situations the flow of physical quantities in the network, as characterized…
Many critical infrastructure systems have network structure and are under stress. Despite their national importance, the complexity of large-scale transport networks means we do not fully understand their vulnerabilities to cascade…
Threshold rules of spreading in binary-state networks lead to cascades. We study persistent cascade-recovery dynamics on quasi-robust networks, i.e., networks which are robust against small trigger but may collapse for larger one. It is…
We propose a statistical model for weighted temporal networks capable of measuring the level of heterogeneity in a financial system. Our model focuses on the level of diversification of financial institutions; that is, whether they are more…
The modeling of cascading failure in power systems is difficult because of the many different mechanisms involved; no single model captures all of these mechanisms. Understanding the relative importance of these different mechanisms is an…
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…
Small and Medium-sized Enterprises (SMEs) are known to play a vital role in economic growth, employment, and innovation. However, they tend to face significant challenges in accessing credit due to limited financial histories, collateral…
We consider a network of bank holdings, where every holding has two subsidiaries of different types. A subsidiary can trade with another holding's subsidiary of the same type. Holdings support their subsidiaries up to a certain level when…
Over the last two decades, financial systems have been studied and analysed from the perspective of complex networks, where the nodes and edges in the network represent the various financial components and the strengths of correlations…
Multiplicative random cascade model naturally reproduces the intermittency or multifractality, which is frequently shown among hierarchical complex systems such as turbulence and financial markets. As described herein, we investigate the…
The role of Network Theory in the study of the financial crisis has been widely spotted in the latest years. It has been shown how the network topology and the dynamics running on top of it can trigger the outbreak of large systemic crisis.…