Related papers: Pathways towards instability in financial networks

Will a large economy be stable? Building on Robert May's original argument for large ecosystems, we conjecture that evolutionary and behavioural forces conspire to drive the economy towards marginal stability. We study networks of firms in…

Several mechanisms have been proposed to explain the spontaneous generation of self-organized patterns, hypothesised to play a role in the formation of many of the magnificent patterns observed in Nature. In several cases of interest, the…

We study the mean field approximation of a recent model of cascades on networks relevant to the investigation of systemic risk control in financial networks. In the model, the hypothesis of a trend reinforcement in the stochastic process…

Money flow models are essential tools to understand different economical phenomena, like saving propensities and wealth distributions. In spite of their importance, most of them are based on synthetic transaction networks with simple…

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…

The recent discovery of universal principles underlying many complex networks occurring across a wide range of length scales in the biological world has spurred physicists in trying to understand such features using techniques from…

In a previous paper, we applied a field formalism to analyze capital allocation and accumulation within a microeconomic framework of investors and firms. The financial connections were modeled by a field of stakes, representing the links…

Credit networks rely on decentralized, pairwise trust relationships (channels) to exchange money or goods. Credit networks arise naturally in many financial systems, including the recent construct of payment channel networks in blockchain…

Social, biological and economic networks grow and decline with occasional fragmentation and re-formation, often explained in terms of external perturbations. We show that these phenomena can be a direct consequence of simple imitation and…

In this paper, we propose a dynamical model to capture cascading failures among interconnected organizations in the global financial system. Failures can take the form of bankruptcies, defaults, and other insolvencies. The network that…

Many critical infrastructure systems have network structure and are under stress. Despite their national importance, the complexity of large-scale transport networks means we do not fully understand their vulnerabilities to cascade…

We contribute to the understanding of how systemic risk arises in a network of credit-interlinked agents. Motivated by empirical studies we formulate a network model which, despite its simplicity, depicts the nature of interbank markets…

The economical world consists of a highly interconnected and interdependent network of firms. Here we develop temporal and structural network tools to analyze the state of the economy. Our analysis indicates that a strong clustering can be…

The relationship between network topology and system dynamics has significant implications for unifying our understanding of the interplay among metabolic, gene-regulatory, and ecosystem network architecures. Here we analyze the stability…

Mays celebrated theoretical work of the 70s contradicted the established paradigm by demonstrating that complexity leads to instability in biological systems. Here Mays random-matrix modelling approach is generalized to realistic…

Social ecological systems are often difficult to investigate and manage because of their inherent complexity1. Small variations in external drivers can lead to abrupt changes associated with instabilities and bifurcations in the underlying…

Norms of Persistent Homology introduced in topological data analysis are seen as indicators of system instability, analogous to the changing predictability that is captured in financial market uncertainty indexes. This paper demonstrates…

Recent developments in the global liberalization of equity and currency markets, coupled to advances in trading technologies, are making markets increasingly interdependent. This increased fluidity raises questions about the stability of…

Propagation of balance-sheet or cash-flow insolvency across financial institutions may be modeled as a cascade process on a network representing their mutual exposures. We derive rigorous asymptotic results for the magnitude of contagion in…

The dynamic network of relationships among corporations underlies cascading economic failures including the current economic crisis, and can be inferred from correlations in market value fluctuations. We analyze the time dependence of the…