Related papers: Sensitivity and Computational Complexity in Financ…
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…
An important source of high clustering coefficient in real-world networks is transitivity. However, existing approaches for modeling transitivity suffer from at least one of the following problems: i) they produce graphs from a specific…
A complex network processing information or physical flows is usually characterized by a number of macroscopic quantities such as the diameter and the betweenness centrality. An issue of significant theoretical and practical interest is how…
Measuring systemic risk or fragility of financial systems is a ubiquitous task of fundamental importance in analyzing market efficiency, portfolio allocation, and containment of financial contagions. Recent attempts have shown that…
Common asset holding by financial institutions, namely portfolio overlap, is nowadays regarded as an important channel for financial contagion with the potential to trigger fire sales and thus severe losses at the systemic level. In this…
Over the last two decades, financial systems have been studied and analysed from the perspective of complex networks, where the nodes and edges in the network represent the various financial components and the strengths of correlations…
Complex systems are large collections of entities that organize themselves into non-trivial structures that can be represented by networks. A key emergent property of such systems is robustness against random failures or targeted attacks…
The small-world phenomenon has been already the subject of a huge variety of papers, showing its appeareance in a variety of systems. However, some big holes still remain to be filled, as the commonly adopted mathematical formulation…
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…
Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk…
The interconnectedness of financial institutions affects instability and credit crises. To quantify systemic risk we introduce here the PD model, a dynamic model that combines credit risk techniques with a contagion mechanism on the network…
This paper introduces a formulation of the optimal network compression problem for financial systems. This general formulation is presented for different levels of network compression or rerouting allowed from the initial interbank network.…
The recent financial crisis has stressed the need to understand financial systems as networks of interdependent countries, where cross-border financial linkages play the fundamental role. It has also been emphasized that the relevance of…
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…
Traditionally, there is no evidence suggesting that there are strong ties between the rich-club property and the function of complex networks. In this study, we find that whether a very small portion of rich nodes connected to each other or…
Real-world networks are neither regular nor random, a fact elegantly explained by mechanisms such as the Watts-Strogatz or the Barabasi-Albert models, among others. Both mechanisms naturally create shortcuts and hubs, which while enhancing…
Complex evolving systems such as the biosphere, ecosystems and societies exhibit sudden collapses, for reasons that are only partially understood. Here we study this phenomenon using a mathematical model of a system that evolves under…
Cascading failures, such as bankruptcies and defaults, pose a serious threat for the resilience of the global financial system. Indeed, because of the complex investment and cross-holding relations within the system, failures can occur as a…
Much research in systemic risk is focused on default contagion. While this demands an understanding of valuation, fewer articles specifically deal with the existence, the uniqueness, and the computation of equilibrium prices in structural…
Financial networks are typically estimated by applying standard time series analyses to price-based economic variables collected at low-frequency (e.g., daily or monthly stock returns or realized volatility). These networks are used for…