Related papers: Incentivizing Resilience in Financial Networks
This paper studies the trading volumes and wealth distribution of a novel agent-based model of an artificial financial market. In this model, heterogeneous agents, behaving according to the Von Neumann and Morgenstern utility theory, may…
Financial transaction fraud prevention faces challenges such as complex relationship structures, concealed behavioral patterns, and dynamically changing data distribution. Discrimination models relying solely on independent sample features…
We study contagion and systemic risk in sparse financial networks with balance-sheet interactions on a directed random graph. Each institution has homogeneous liabilities and equity, and exposures along outgoing edges are split equally…
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 interconnectedness of financial institutions affects instability and credit crises. To quantify systemic risk we introduce here the PD model, a dynamic model that combines credit risk techniques with a contagion mechanism on the network…
We discuss the systemic risk implied by the interbank exposures reconstructed with the maximum entropy method. The maximum entropy method severely underestimates the risk of interbank contagion by assuming a fully connected network, while…
The power of networks manifests itself in a highly non-linear amplification of a number of effects, and their weakness - in propagation of cascading failures. The potential systemic risk effects can be either exacerbated or mitigated,…
We consider a model of contagion in financial networks recently introduced in the literature, and we characterize the effect of a few features empirically observed in real networks on the stability of the system. Notably, we consider the…
The global balance index is used in the network literature to quantify how balanced a signed network is. In this paper we show that the global balance index of financial correlation networks can be used as a systemic risk measure. We define…
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…
An asset network systemic risk (ANWSER) model is presented to investigate the impact of how shadow banks are intermingled in a financial system on the severity of financial contagion. Particularly, the focus of this study is the impact of…
Financial crises emerge when structural vulnerabilities accumulate across sectors, markets, and investor behavior. Predicting these systemic transitions is challenging because they arise from evolving interactions between market…
Following the financial crisis of 2007-2008, a deep analogy between the origins of instability in financial systems and complex ecosystems has been pointed out: in both cases, topological features of network structures influence how easily…
This paper introduces a novel framework to study default dependence and systemic risk in a financial network that evolves over time. We analyse several indicators of risk, and develop a new latent space model to assess the health of key…
Financial contagion from liquidity shocks has being recently ascribed as a prominent driver of systemic risk in interbank lending markets. Building on standard compartment models used in epidemics, in this work we develop an EDB…
We introduce a new framework to model interactions among agents which seek to trade to minimize their risk with respect to some future outcome. We quantify this risk using the concept of risk measures from finance, and introduce a class of…
Since the latest financial crisis, the idea of systemic risk has received considerable interest. In particular, contagion effects arising from cross-holdings between interconnected financial firms have been studied extensively. Drawing…
In the context of containment of default contagion in financial networks, we here study a regulator that allocates pre-shock capital or liquidity buffers across banks connected by interbank liabilities and common external asset exposures.…
A novel network-based approach is introduced to analyze banking systems, focusing on two main themes: identifying influential nodes within global banking networks using Bank for International Settlements data and developing an algorithm to…
The increasing integration of world economies, which organize in complex multilayer networks of interactions, is one of the critical factors for the global propagation of economic crises. We adopt the network science approach to quantify…