Related papers: Impact of shadow banks on financial contagion
Internet finance is a new financial model that applies Internet technology to payment, capital borrowing and lending and transaction processing. In order to study the internal risks, this paper uses the Internet financial risk elements as…
We provide an overview of the relationship between financial networks and systemic risk. We present a taxonomy of different types of systemic risk, differentiating between direct externalities between financial organizations (e.g.,…
Threats on the stability of a financial system may severely affect the functioning of the entire economy, and thus considerable emphasis is placed on the analyzing the cause and effect of such threats. The financial crisis in the current…
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…
Credit and liquidity risks represent main channels of financial contagion for interbank lending markets. On one hand, banks face potential losses whenever their counterparties are under distress and thus unable to fulfill their obligations.…
In spite of the growing theoretical literature on cascades of failures in interbank lending networks, empirical results seem to suggest that networks of direct exposures are not the major channel of financial contagion. In this paper we…
A simple banking network model is proposed which features multiple waves of bank defaults and is analytically solvable in the limiting case of an infinitely large homogeneous network. The model is a collection of nodes representing…
This paper introduces a novel framework to study default dependence and systemic risk in a financial network that evolves over time. We analyse several indicators of risk, and develop a new latent space model to assess the health of key…
This mini-project models propagation of shocks, in time point, through links in connected banks. In particular, financial network of 100 banks out of which 15 are shocked to default (that is, 85.00% of the banks are solvent) is modelled…
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…
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…
We develop a structural default model for interconnected financial institutions in a probabilistic framework. For all possible network structures we characterize the joint default distribution of the system using Bayesian network…
The importance of adequately modeling credit risk has once again been highlighted in the recent financial crisis. Defaults tend to cluster around times of economic stress due to poor macro-economic conditions, {\em but also} by directly…
The inability to see and quantify systemic financial risk comes at an immense social cost. Systemic risk in the financial system arises to a large extent as a consequence of the interconnectedness of its institutions, which are linked…
We propose a new model of the liquidity driven banking system focusing on overnight interbank loans. This significant branch of the interbank market is commonly neglected in the banking system modeling and systemic risk analysis. We…
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.…
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…
The global financial system has become highly connected and complex. Has been proven in practice that existing models, measures and reports of financial risk fail to capture some important systemic dimensions. Only lately, advisory boards…
The 2008 financial crisis exposed fundamental vulnerabilities in interconnected banking systems, yet existing frameworks fail to integrate spatial propagation with network contagion mechanisms. This paper develops a unified spatial-network…
This paper develops a continuous functional framework for analyzing contagion dynamics in financial networks, extending the Navier-Stokes-based approach to network-structured spatial processes. We model financial distress propagation as a…