Related papers: Pathways towards instability in financial networks
According to the May-Wigner stability theorem, increasing the complexity of a network inevitably leads to its destabilization, such that a small perturbation will be able to disrupt the entire system. One of the principal arguments against…
A minimal stochastic dynamical model of the interbank network is introduced, with linear interactions mediated by an integral of recent variations. Defining stress as the variance over the banks' states, the interaction correction to the…
The theory of multilayer networks is in its early stages, and its development provides vital methods for understanding complex systems. Multilayer networks, in their multiplex form, have been introduced within the last three years to…
We propose a dynamic model of dependence structure between financial institutions within a financial system and we construct measures for dependence and financial instability. Employing Markov structures of joint credit migrations, our…
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…
Tipping points occur in diverse systems in various disciplines such as ecology, climate science, economy or engineering. Tipping points are critical thresholds in system parameters or state variables at which a tiny perturbation can lead to…
Many real-world networks such as social networks consist of strategic agents. The topology of these networks often plays a crucial role in determining the ease and speed with which certain information driven tasks can be accomplished.…
Modern society heavily relies on strongly connected, socio-technical systems. As a result, distinct risks threatening the operation of individual systems can no longer be treated in isolation. Consequently, risk experts are actively seeking…
How, and to what extent, does an interconnected financial system endogenously amplify external shocks? This paper attempts to reconcile some apparently different views emerged after the 2008 crisis regarding the nature and the relevance of…
Many networks describing complex systems are directed: the interactions between elements are not symmetric. Recent work has shown that these networks can display properties such as trophic coherence or non-normality, which in turn affect…
Oscillatory dynamics are ubiquitous in biological networks. Possible sources of oscillations are well understood in low-dimensional systems, but have not been fully explored in high-dimensional networks. Here we study large networks…
When studying social, economic and biological systems, one has often access to only limited information about the structure of the underlying networks. An example of paramount importance is provided by financial systems: information on the…
Symmetry-breaking instabilities play an important role in understanding the mechanisms underlying the diversity of patterns observed in nature, such as in Turing's reaction--diffusion theory, which connects cellular signalling and transport…
Cross-border equity and long-term debt securities portfolio investment networks are analysed from 2002 to 2012, covering the 2008 global financial crisis. They serve as network-proxies for measuring the robustness of the global financial…
The behavior of complex systems is determined not only by the topological organization of their interconnections but also by the dynamical processes taking place among their constituents. A faithful modeling of the dynamics is essential…
An interbank market lets participants pool the risk arising from the combination of illiquid investments and random withdrawals by depositors. But it also creates the potential for one bank's failure to trigger off avalanches of further…
In the wake of the 2008 financial crisis the role of strongly interconnected markets in fostering systemic instability has been increasingly acknowledged. Trade networks of commodities are susceptible to deleterious cascades of supply…
In his seminal work in the 1970s, Robert May suggested that there is an upper limit to the number of species that can be sustained in stable equilibrium by an ecosystem. This deduction was at odds with both intuition and the observed…
Assessing the resilience of the economy requires accounting for its intrinsic multi-layer nature, by assessing for instance how disruptions at the firm level spread through the production network and propagate to the banking sector. Methods…
Fire sales are among the major drivers of market instability in modern financial systems. Due to iterated distressed selling and the associated price impact, initial shocks to some institutions can be amplified dramatically through the…