Related papers: Densely Entangled Financial Systems
Uncertain graphs have been widely used to model complex linked data in many real-world applications, such as guaranteed-loan networks and power grids, where a node or edge may be associated with a probability. In these networks, a node…
In this paper we estimate the propagation of liquidity shocks through interbank markets when the information about the underlying credit network is incomplete. We show that techniques such as Maximum Entropy currently used to reconstruct…
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…
We consider a system consisting of multiple interdependent assets, and a set of defenders, each responsible for securing a subset of the assets against an attacker. The interdependencies between the assets are captured by an attack graph,…
The recent banking crisis has again emphasized the importance of understanding and mitigating systemic risk in financial networks. In this paper, we study a market-driven approach to rescue a bank in distress based on the idea of claims…
Bipartite networks provide an insightful representation of many systems, ranging from mutualistic networks of species interactions to investment networks in finance. The analysis of their topological structures has revealed the ubiquitous…
We investigate cascades in networks consisting of strategic agents with interdependent security. We assume that the strategic agents have choices between i) investing in protecting themselves, ii) purchasing insurance to transfer (some)…
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…
In this paper we analyze the resilience of a network of banks to joint price fluctuations of the external assets in which they have shared exposures, and evaluate the worst-case effects of the possible default contagion. Indeed, when the…
This paper provides the first empirical network analysis of the Argentine interbank money market. Its main topological features are examined applying graph theory, focusing on the unsecured overnight loans settled from 2003 to 2017. The…
The recent financial crisis of 2008 and the 2011 indebtedness of Greece highlight the importance of understanding the structure of the global financial network. In this paper we set out to analyze and characterize this network, as captured…
In portfolio compression, market participants (banks, organizations, companies, financial agents) sign contracts, creating liabilities between each other, which increases the systemic risk. Large, dense markets commonly can be compressed by…
Deep hedging uses recurrent neural networks to hedge financial products that cannot be fully hedged in incomplete markets. Previous work in this area focuses on minimizing some measure of quadratic hedging error by calculating pathwise…
When banks extend loans to each other, they generate a negative externality in the form of systemic risk. They create a network of interbank exposures by which they expose other banks to potential insolvency cascades. In this paper, we show…
One of the most defining features of the global financial network is its inherent complex and intertwined structure. From the perspective of systemic risk it is important to understand the influence of this network structure on default…
Options are contingent claims regarding the value of underlying assets. The Black-Scholes formula provides a road map for pricing these options in a risk-neutral setting, justified by a delta hedging argument in which countervailing…
The structure of many financial networks is protected by privacy and has to be inferred from aggregate observables. Here we consider one of the most successful network reconstruction methods, producing random graphs with desired link…
We study the mean field approximation of a recent model of cascades on networks relevant to the investigation of systemic risk control in financial networks. In the model, the hypothesis of a trend reinforcement in the stochastic process…
We consider a banking network represented by a system of stochastic differential equations coupled by their drift. We assume a core-periphery structure, and that the banks in the core hold a bubbly asset. The banks in the periphery have not…
We consider a model of financial contagion in a bipartite network of assets and banks recently introduced in the literature, and we study the effect of power law distributions of degree and balance-sheet size on the stability of the system.…