Related papers: Diversification and Endogenous Financial Networks

Can one demonstrate quantitative effects of diversity within a system comprised of distinct individuals on the performance of the system as a whole? Assuming that individuals can be different, we develop a model to interpolate between…

We study financial systems from a game-theoretic standpoint. A financial system is represented by a network, where nodes correspond to firms, and directed labeled edges correspond to debt contracts between them. The existence of cycles in…

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…

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…

Misperceptions about extreme dependencies between different financial assets have been an im- portant element of the recent financial crisis. This paper studies inhomogeneity in dependence structures using Markov switching regular vine…

The current global financial system forms a highly interconnected network where a default in one of its nodes can propagate to many other nodes, causing a catastrophic avalanche effect. In this paper we consider the problem of reducing the…

The scope of financial systemic risk research encompasses a wide range of interbank channels and effects, including asset correlation shocks, default contagion, illiquidity contagion, and asset fire sales. This paper introduces a financial…

Threadneedle is a multi-agent simulation framework, based on a full double entry book keeping implementation of the banking system's fundamental transactions. It is designed to serve as an experimental test bed for economic simulations that…

We propose a dynamic network model where two mechanisms control the probability of a link between two nodes: (i) the existence or absence of this link in the past, and (ii) node-specific latent variables (dynamic fitnesses) describing the…

We present an empirical study of the intertwined behaviour of members in a financial market. Exploiting a database where the broker that initiates an order book event can be identified, we decompose the correlation and response functions…

In this paper, we introduce an impact centrality measure to evaluate shock propagation on financial networks capturing a notion of contagion and systemic risk contributions, permitting comparisons of these risks over time. In addition, we…

We use the theory of complex networks in order to quantitatively characterize the formation of communities in a particular financial market. The system is composed by different banks exchanging on a daily basis loans and debts of liquidity.…

According to the leading models in modern finance, the presence of intraday lead-lag relationships between financial assets is negligible in efficient markets. With the advance of technology, however, markets have become more sophisticated.…

Relationship lending is broadly interpreted as a strong partnership between a lender and a borrower. Nevertheless, we still lack consensus regarding how to quantify the strength of a lending relationship, while simple statistics such as the…

The DebtRank algorithm has been increasingly investigated as a method to estimate the impact of shocks in financial networks, as it overcomes the limitations of the traditional default-cascade approaches. Here we formulate a dynamical…

Institutions and investors are constantly faced with the challenge of appropriately distributing endowments. No budget is limitless and optimising overall spending without sacrificing positive outcomes has been approached and resolved using…

Supply chains are the backbone of the global economy. Disruptions to them can be costly. Centrally managed supply chains invest in ensuring their resilience. Decentralized supply chains, however, must rely upon the self-interest of their…

Realistic large-scale networks display an heterogeneous distribution of connectivity weights, that might also randomly vary in time. We show that depending on the level of heterogeneity in the connectivity coefficients, different…

Countries and cities are likely to enter economic activities that are related to those that are already present in them. Yet, while these path dependencies are universally acknowledged, we lack an understanding of the diversification…

As few real systems comprise indistinguishable units, diversity is a hallmark of nature. Diversity among interacting units shapes properties of collective behavior such as synchronization and information transmission. However, the benefits…