Related papers: How Damage Diversification Can Reduce Systemic Ris…
We address the problem of distributed state estimation of a linear dynamical process in an attack-prone environment. Recent attempts to solve this problem impose stringent redundancy requirements on the measurement and communication…
As impressively shown by the financial crisis in 2007/08, contagion effects in financial networks harbor a great threat for the stability of the entire system. Without sufficient capital requirements for banks and other financial…
Specialization and diversification are two major strategies that complex systems might exploit. Given a fixed amount of resources, the question is whether to invest this in elements that respond in a correlated manner to external…
Our society nowadays is governed by complex networks, examples being the power grids, telecommunication networks, biological networks, and social networks. It has become of paramount importance to understand and characterize the dynamic…
Large scale networks delineating collective dynamics often exhibit cascading failures across nodes leading to a system-wide collapse. Prominent examples of such phenomena would include collapse on financial and economic networks.…
We propose a definition of diversification as a binary relationship between financial portfolios. According to it, a convex linear combination of several risk positions with some weights is considered to be less risky than the probabilistic…
The dynamics of protection processes has been a fundamental challenge in systemic risk analysis. The conceptual principle and methodological techniques behind the mechanisms involved [in such dynamics] have been harder to grasp than…
Since the latest financial crisis, the idea of systemic risk has received considerable interest. In particular, contagion effects arising from cross-holdings between interconnected financial firms have been studied extensively. Drawing…
This paper examines the pricing of short-term and long-term dynamic network risk in the cross-section of stock returns. Stocks with high sensitivities to dynamic network risk earn lower returns. We rationalize our finding with economic…
Complex networks with heterogeneous distribution of loads may undergo a global cascade of overload failures when highly loaded nodes or edges are removed due to attacks or failures. Since a small attack or failure has the potential to…
Robustness in response to unexpected events is always desirable for real-world networks. To improve the robustness of any networked system, it is important to analyze vulnerability to external perturbation such as random failures or…
According to different typologies of activity and priority, risks can assume diverse meanings and it can be assessed in different ways. In general risk is measured in terms of a probability combination of an event (frequency) and its…
The networked nature of supply chains makes them susceptible to systemic risk, where local firm failures can propagate through firm interdependencies that can lead to cascading supply chain disruptions. The systemic risk of supply chains…
We consider a dynamical model of distress propagation on complex networks, which we apply to the study of financial contagion in networks of banks connected to each other by direct exposures. The model that we consider is an extension of…
By leveraging the principle of software polyculture to ensure security in a network, we proposed a vulnerability-based software diversity metric to determine how a network topology can be adapted to minimize security vulnerability while…
When network and graph theory are used in the study of complex systems, a typically finite set of nodes of the network under consideration is frequently either explicitly or implicitly considered representative of a much larger finite or…
Cascading failure is a potentially devastating process that spreads on real-world complex networks and can impact the integrity of wide-ranging infrastructures, natural systems, and societal cohesiveness. One of the essential features that…
As economic entities become increasingly interconnected, a shock in a financial network can provoke significant cascading failures throughout the system. To study the systemic risk of financial systems, we create a bi-partite banking…
In this study, we propose a new multi-objective portfolio optimization with idiosyncratic and systemic risks for financial networks. The two risks are measured by the idiosyncratic variance and the network clustering coefficient derived…
We model the influence of sharing large exogeneous losses to the reinsurance market by a bipartite graph. Using Pareto-tailed claims and multivariate regular variation we obtain asymptotic results for the Value-at-Risk and the Conditional…