Related papers: Sensitivity and Computational Complexity in Financ…
The global balance is a well-known indicator of the behavior of a signed network. Recent literature has introduced the concept of local balance as a measure of the contribution of a single node to the overall balance of the network. In the…
Eisenberg and Noe (2001) analyze systemic risk for financial institutions linked by a network of liabilities. They show that the solution to their model is unique when the financial system is satisfies a regularity condition involving risk…
A key question in many network studies is whether the observed correlations between units are primarily due to contagion or latent confounding. Here, we study this question using a segregated graph (Shpitser, 2015) representation of these…
In a network, a local disturbance can propagate and eventually cause a substantial part of the system to fail, in cascade events that are easy to conceptualize but extraordinarily difficult to predict. Here, we develop a statistical…
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 financial market is a complex dynamical system composed of a large variety of intricate relationships between several entities, such as banks, corporations and institutions. At the heart of the system lies the stock exchange mechanism,…
Just as a herd of animals relies on its robust social structure to survive in the wild, similarly robustness is a crucial characteristic for the survival of a complex network under attack. The capacity to measure robustness in complex…
A fundamental problem in studying and modeling economic and financial systems is represented by privacy issues, which put severe limitations on the amount of accessible information. Here we introduce a novel, highly nontrivial method to…
The stable functionality of networked systems is a hallmark of their natural ability to coordinate between their multiple interacting components. Yet, strikingly, real-world networks seem random and highly irregular, apparently lacking any…
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.,…
Many link formation mechanisms for the evolution of social networks have been successful to reproduce various empirical findings in social networks. However, they have largely ignored the fact that individuals make decisions on whether to…
Economic and financial networks play a crucial role in various important processes, including economic integration, globalization, and financial crises. Of particular interest is understanding whether the temporal evolution of a real…
Supply chain disruptions constitute an often underestimated risk for financial stability. As in financial networks, systemic risks in production networks arises when the local failure of one firm impacts the production of others and might…
We present a methodology to extract the backbone of complex networks based on the weight and direction of links, as well as on nontopological properties of nodes. We show how the methodology can be applied in general to networks in which…
In order to scale transaction rates for deployment across the global web, many cryptocurrencies have deployed so-called "Layer-2" networks of private payment channels. An idealized payment network behaves like a Credit Network, a model for…
The financial crisis has dramatically demonstrated that the traditional approach to apply univariate monetary risk measures to single institutions does not capture sufficiently the perilous systemic risk that is generated by the…
In this paper we analyze the resilience of a network of banks to joint price fluctuations of the external assets in which they have shared exposures, and evaluate the worst-case effects of the possible default contagion. Indeed, when the…
In this paper, we assess how the stability of financial networks is affected by interconnectedness considering its tiniest variation: the edge. We compute the impact of edges as the percentage difference in the systemic risk (SR) of the…
The insufficient understanding of the credit network structure was recognized as a key factor for regulators' underestimation of the destructive systematic risk during the financial crisis that started in 2007. The existing credit network…
In the aftermath of the financial crisis, the growing literature on financial networks has widely documented the predictive power of topological characteristics (e.g. degree centrality measures) to explain the systemic impact or systemic…