Related papers: Systemic risk through contagion in a core-peripher…
In normal times, it is assumed that financial institutions operating in non-overlapping sectors have complementary and distinct outcomes, typically reflected in mostly uncorrelated outcomes and asset returns. Such is the reasoning behind…
Financial contagion from liquidity shocks has being recently ascribed as a prominent driver of systemic risk in interbank lending markets. Building on standard compartment models used in epidemics, in this work we develop an EDB…
We introduce a general model for the balance-sheet consistent valuation of interbank claims within an interconnected financial system. Our model represents an extension of clearing models of interdependent liabilities to account for the…
Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk…
We consider a dynamical model of distress propagation on complex networks, which we apply to the study of financial contagion in networks of banks connected to each other by direct exposures. The model that we consider is an extension of…
The purpose of this paper is to advance the understanding of the conditions that give rise to flash crash contagion, particularly with respect to overlapping asset portfolio crowding. To this end, we designed, implemented, and assessed a…
Micro-structural models of contagion and systemic risk emphasize that shock propagation is inherently multi-channel, spanning counterparty exposures, short-term funding and roll-over risk, securities cross-holdings, and common-asset…
We test the hypothesis that interconnections across financial institutions can be explained by a diversification motive. This idea stems from the empirical evidence of the existence of long-term exposures that cannot be explained by a…
Following the financial crisis of 2007-2008, a deep analogy between the origins of instability in financial systems and complex ecosystems has been pointed out: in both cases, topological features of network structures influence how easily…
Financial markets are exposed to systemic risk, the risk that a substantial fraction of the system ceases to function and collapses. Systemic risk can propagate through different mechanisms and channels of contagion. One important form of…
This work develops an agent-based model for the study of how the leverage through the use of repurchase agreements can function as a mechanism for the propagation and amplification of financial shocks in a financial system. Based on the…
Modelling of contagion in interbank networks is discussed. A model taking into account bow-tie structure and dissasortativity of interbank networks is developed. The model is shown to provide a good quantitative description of the Russian…
We develop a novel stress-test framework to monitor systemic risk in financial systems. The modular structure of the framework allows to accommodate for a variety of shock scenarios, methods to estimate interbank exposures and mechanisms of…
We model a network economy with three sectors: downstream firms, upstream firms, and banks. Agents are linked by productive and credit relationships so that the behavior of one agent influences the behavior of the others through network…
We analyze cascades of defaults in an interbank loan market. The novel feature of this study is that the network structure and the size distribution of banks are derived from empirical data. We find that the ability of a defaulted…
As impressively shown by the financial crisis in 2007/08, contagion effects in financial networks harbor a great threat for the stability of the entire system. Without sufficient capital requirements for banks and other financial…
We present a network-based framework for simulating systemic risk that considers shock propagation in banking systems. In particular, the framework allows the modeller to reflect a top-down framework where a shock to one bank in the system…
The increasing integration of world economies, which organize in complex multilayer networks of interactions, is one of the critical factors for the global propagation of economic crises. We adopt the network science approach to quantify…
Since the latest financial crisis, the idea of systemic risk has received considerable interest. In particular, contagion effects arising from cross-holdings between interconnected financial firms have been studied extensively. Drawing…
Assessing the resilience of the economy requires accounting for its intrinsic multi-layer nature, by assessing for instance how disruptions at the firm level spread through the production network and propagate to the banking sector. Methods…