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We investigate the portfolio selection problem against the systemic risk which is measured by CoVaR. We first demonstrate that the systemic risk of pure stock portfolios is essentially uncontrollable due to the contagion effect and the…
We study cascades on a two-layer multiplex network, with asymmetric feedback that depends on the coupling strength between the layers. Based on an analytical branching process approximation, we calculate the systemic risk measured by the…
Drawing on recent contributions inferring financial interconnectedness from market data, our paper provides new insights on the evolution of the US financial industry over a long period of time by using several tools coming from network…
We analyse time series of CDS spreads for a set of major US and European institutions on a pe- riod overlapping the recent financial crisis. We extend the existing methodology of {\epsilon}-drawdowns to the one of joint {\epsilon}-drawups,…
Maintaining a balance between returns and volatility is a common strategy for portfolio diversification, whether investing in traditional equities or digital assets like cryptocurrencies. One approach for diversification is the application…
We consider weighted directed networks for analysing, over the period 2000-2013, the interdependencies between volatilities of a large panel of stocks belonging to the S\&P100 index. In particular, we focus on the so-called {\it Long-Run…
The risk of a credit portfolio depends crucially on correlations between the probability of default (PD) in different economic sectors. Often, PD correlations have to be estimated from relatively short time series of default rates, and the…
I show the equivalence between a model of financial contagion and the threshold model of global cascades proposed by Watts (2002). The model financial network comprises banks that hold risky external assets as well as interbank assets. It…
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 main contribution of the paper is to employ the financial market network as a useful tool to improve the portfolio selection process, where nodes indicate securities and edges capture the dependence structure of the system. Three…
In this research, we introduce a robust metric to identify Systemically Important Financial Institution (SIFI) in a financial network by taking into account both common idiosyncratic shocks and contagion through counterparty exposures. We…
Many new models for measuring financial contagion have been presented recently. While these models have not been specified for investment funds directly, there are many similarities that could be explored to extend the models. In this work…
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…
We develop a model for contagion in reinsurance networks by which primary insurers' losses are spread through the network. Our model handles general reinsurance contracts, such as typical excess of loss contracts. We show that simpler…
This paper develops a continuous functional framework for analyzing contagion dynamics in financial networks, extending the Navier-Stokes-based approach to network-structured spatial processes. We model financial distress propagation as a…
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…
Bipartite networks provide a major insight into the organisation of many real-world systems. One of the most relevant issues encountered when modelling a bipartite network is that of facing the information shortage concerning intra-layer…
A financial system contains many elements networked by their relationships. Extensive works show that topological structure of the network stores rich information on evolutionary behaviors of the system such as early warning signals of…
The scope of financial systemic risk research encompasses a wide range of interbank channels and effects, including asset correlation shocks, default contagion, illiquidity contagion, and asset fire sales. This paper introduces a financial…
We study the difference between the level of systemic risk that is empirically measured on an interbank network and the risk that can be deduced from the balance sheets composition of the participating banks. Using generalised DebtRank…