Related papers: Network Structure and Counterparty Credit Risk
The aim of this paper is to quantify and manage systemic risk caused by default contagion in the interbank market. We model the market as a random directed network, where the vertices represent financial institutions and the weighted edges…
The choice of free parameters in network models is subjective, since it depends on what topological properties are being monitored. However, we show that the Maximum Likelihood (ML) principle indicates a unique, statistically rigorous…
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…
The market practice of extrapolating different term structures from different instruments lacks a rigorous justification in terms of cash flows structure and market observables. In this paper, we integrate our previous consistent theory for…
In the past years statistical physics has been successfully applied for complex networks modelling. In particular, it has been shown that the maximum entropy principle can be exploited in order to construct graph ensembles for real-world…
In this paper, we consider the problem of exploring structural regularities of networks by dividing the nodes of a network into groups such that the members of each group have similar patterns of connections to other groups. Specifically,…
We study the family of network models derived by requiring the expected properties of a graph ensemble to match a given set of measurements of a real-world network, while maximizing the entropy of the ensemble. Models of this type play the…
Complex networks describe a wide range of systems in nature and society, much quoted examples including the cell, a network of chemicals linked by chemical reactions, or the Internet, a network of routers and computers connected by physical…
We present a new method for articulating scale-dependent topological descriptions of the network structure inherent in many complex systems. The technique is based on "Partition Decoupled Null Models,'' a new class of null models that…
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…
The interbank market has a natural multiplex network representation. We employ a unique database of supervisory reports of Italian banks to the Banca d'Italia that includes all bilateral exposures broken down by maturity and by the secured…
Networks of financial exposures are the key propagators of risk and distress among banks, but their empirical structure is not publicly available because of confidentiality. This limitation has triggered the development of methods of…
In this article the problem of reconstructing the pattern of connection between agents from partial empirical data in a macro-economic model is addressed, given a set of behavioral equations. This systemic point of view puts the focus on…
This paper presents a new model for pricing financial derivatives subject to collateralization. It allows for collateral arrangements adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized…
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…
In this brief review, we critically examine the recent work done on correlation-based networks in financial systems. The structure of empirical correlation matrices constructed from the financial market data changes as the individual stock…
SOFR derivatives market remains illiquid and incomplete so it is not amenable to classical risk-neutral term structure models which are based on the assumption of perfect liquidity and completeness. This paper develops a statistical SOFR…
The rapid evolution of network services demands new paradigms for studying and designing networks. In order to understand the underlying mechanisms that provide network functions, we propose a framework which enables the functional analysis…
We review the main tools which allow for the statistical characterization of weighted networks. We then present two case studies, the airline connection network and the scientific collaboration network, which are representative of critical…
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…