Related papers: Diversification and Endogenous Financial Networks
Demonstrations, protests, riots, and shifts in public opinion respond to the coordinating potential of communication networks. Digital technologies have turned interpersonal networks into massive, pervasive structures that constantly…
We employ the mathematical programming approach in conjunction with the graph theory to study the structure of correspondent banking networks. Optimizing the network requires decisions to be made to onboard, terminate or restrict the bank…
Management of systemic risk in financial markets is traditionally associated with setting (higher) capital requirements for market participants. There are indications that while equity ratios have been increased massively since the…
Complex networks often have a modular structure, where a number of tightly- connected groups of nodes (modules) have relatively few interconnections. Modularity had been shown to have an important effect on the evolution and stability of…
We study the role of contingent convertible bonds (CoCos) in a complex network of interconnected banks. By studying the system's phase transitions, we reveal that the structure of the interbank network is of fundamental importance for the…
We propose here a multiplex network approach to investigate simultaneously different types of dependency in complex data sets. In particular, we consider multiplex networks made of four layers corresponding respectively to linear,…
Investigating relation between various structural patterns found in real-world networks and stability of underlying systems is crucial to understand importance and evolutionary origin of such patterns. We evolve multiplex networks,…
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…
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…
Inspired by recent ideas on how the analysis of complex financial risks can benefit from analogies with independent research areas, we propose an unorthodox framework for mapping microfinance credit risk---a major obstacle to the…
We consider networks of banks with assets and liabilities. Some banks may be insolvent, and a central bank can decide which insolvent banks, if any, to bail out. We view bailouts as an optimization problem where the central bank has given…
A probabilistic framework is introduced that represents stylized banking networks and aims to predict the size of contagion events. In contrast to previous work on random financial networks, which assumes independent connections between…
We propose a tractable unified framework to study the evolution and interaction of model-misspecification concerns and complexity aversion in repeated decision problems. This aims to capture environments where decision makers worry that…
Network science has become a powerful tool to describe the structure and dynamics of real-world complex physical, biological, social, and technological systems. Largely built on empirical observations to tackle heterogeneous, temporal, and…
In this paper we consider a mean-field model of interacting diffusions for the monetary reserves in which the reserves are subjected to a self- and cross-exciting shock. This is motivated by the financial acceleration and fire sales…
In a previous work, we applied a field formalism to analyze capital allocation and accumulation within a network of investors and firms. In that framework, financial agents could invest in firms or in other investors, and banks-introduced…
Current understanding holds that financial contagion is driven mainly by the system-wide interconnectedness of institutions. A distinction has been made between systematic and idiosyncratic channels of contagion, with shocks transmitted…
The seniority of debt, which determines the order in which a bankrupt institution repays its debts, is an important and sometimes contentious feature of financial crises, yet its impact on system-wide stability is not well understood. We…
In this work we present a strategic network formation model predicting the emergence of multigroup structures. Individuals decide to form or remove links based on the benefits and costs those connections carry; we focus on bilateral consent…
One of the most important concepts in biological network analysis is that of network motifs, which are patterns of interconnections that occur in a given network at a frequency higher than expected in a random network. In this work we are…