Related papers: Leveraging the network: a stress-test framework ba…

This paper introduces forward-looking measures of the network connectedness of fears in the financial system, arising due to the good and bad beliefs of market participants about uncertainty that spreads unequally across a network of banks.…

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 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…

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 field of Financial Networks is a paramount example of the novel applications of Statistical Physics that have made possible by the present data revolution. As the total value of the global financial market has vastly outgrown the value…

Distress propagation occurs in connected networks, its rate and extent being dependent on network topology. To study this, we choose economic production networks as a paradigm. An economic network can be examined at many levels: linkages…

The role of Network Theory in the study of the financial crisis has been widely spotted in the latest years. It has been shown how the network topology and the dynamics running on top of it can trigger the outbreak of large systemic crisis.…

This paper develops a continuous framework for analyzing financial contagion that incorporates both geographic proximity and interbank network linkages. The framework characterizes stress propagation through a master equation whose solution…

The purpose of this research article is to discover how the econophysics analysis can complement the econometrics models in application to the risk management in the central banks and financial institutions, operating within the nonlinear…

We develop a general approach for stress testing correlations of financial asset portfolios. The correlation matrix of asset returns is specified in a parametric form, where correlations are represented as a function of risk factors, such…

Aggregate shocks affect most households' and firms' decisions. Using three stylized models we show that inference based on cross-sectional data alone generally fails to correctly account for decision making of rational agents facing…

We consider a model of a simple financial system consisting of a leveraged investor that invests in a risky asset and manages risk by using Value-at-Risk (VaR). The VaR is estimated by using past data via an adaptive expectation scheme. We…

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…

Economic models with input-output networks assume that firm or sector (unit) growth is driven by a weighted sum of trade partners' growth and an independently-drawn idiosyncratic shock. I show that the idiosyncratic risk assumption in a…

Whereas traditional credit scoring tends to employ only individual borrower- or loan-level predictors, it has been acknowledged for some time that connections between borrowers may result in default risk propagating over a network. In this…

We propose a generic system model for a special category of interdependent networks, demand-supply networks, in which the demand and the supply nodes are associated with heterogeneous loads and resources, respectively. Our model sheds a…

We report a study of a stylized banking cascade model investigating systemic risk caused by counter party failure using liabilities and assets to define banks' balance sheet. In our stylized system, banks can be in two states: normally…

We demonstrate the use of Adaptive Stress Testing to detect and address potential vulnerabilities in a financial environment. We develop a simplified model for credit card fraud detection that utilizes a linear regression classifier based…

Modeling and analyzing security of networked systems is an important problem in the emerging Science of Security and has been under active investigation. In this paper, we propose a new approach towards tackling the problem. Our approach is…

This paper is part of the research on the interlinkages between insurers and their contribution to systemic risk on the insurance market. Its main purpose is to present the results of the analysis of linkage dynamics and systemic risk in…