Related papers: Interbank markets and multiplex networks: centrali…
Financial markets are a typical example of complex systems where interactions between constituents lead to many remarkable features. Here, we show that a pairwise maximum entropy model (or auto-logistic model) is able to describe switches…
We discuss the systemic risk implied by the interbank exposures reconstructed with the maximum entropy method. The maximum entropy method severely underestimates the risk of interbank contagion by assuming a fully connected network, while…
A modern version of Monetary Circuit Theory with a particular emphasis on stochastic underpinning mechanisms is developed. It is explained how money is created by the banking system as a whole and by individual banks. The role of central…
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 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…
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…
The article presents calculations that prove practical importance of the earlier derived theoretical relationship between the interest rate on the interbank credit market, volume of investment and the quantity of securities tradable on the…
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…
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…
We propose a minimal model of the secured interbank network able to shed light on recent money markets puzzles. We find that excess liquidity emerges due to the interactions between the reserves and liquidity ratio constraints; the…
The topological properties of interbank networks have been discussed widely in the literature mainly because of their relevance for systemic risk. Here we propose to use the Stochastic Block Model to investigate and perform a model…
Node centrality is one of the most important and widely used concepts in the study of complex networks. Here, we extend the paradigm of node centrality in financial and economic networks to consider the changes of node "importance" produced…
We develop a theoretical framework for the study of epidemic-like social contagion in large scale social systems. We consider the most general setting in which different communication platforms or categories form multiplex networks.…
We study the formation of an optimal interbank network in a model where banks control both their supply of liquidity, through cash reserves, and their exposures to other banks' risky projects. The value of each bank's project may suddenly…
The latest financial crisis has painfully revealed the dangers arising from a globally interconnected financial system. Conventional approaches based on the notion of the existence of equilibrium and those which rely on statistical…
This chapter reviews key contributions of complexity science to the study of systemic risk in financial systems. The focus is on network models of financial contagion, where I explore various mechanisms of shock propagation, such as…
We consider a model of contagion in financial networks recently introduced in the literature, and we characterize the effect of a few features empirically observed in real networks on the stability of the system. Notably, we consider the…
Price-mediated contagion occurs when a positive feedback loop develops following a drop in asset prices which forces banks and other financial institutions to sell their holdings. Prior studies of such events fix the level of market…
The vast majority of market impact studies assess each product individually, and the interactions between the different order flows are disregarded. This strong approximation may lead to an underestimation of trading costs and possible…
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…