Related papers: Network Valuation in Financial Systems
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…
The events of the last few years revealed an acute need for tools to systematically model and analyze large financial networks. Many applications of such tools include the forecasting of systemic failures and analyzing probable effects of…
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…
In this paper we estimate the propagation of liquidity shocks through interbank markets when the information about the underlying credit network is incomplete. We show that techniques such as Maximum Entropy currently used to reconstruct…
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…
The centrality in a network is often used to measure nodes' importance and model network effects on a certain outcome. Empirical studies widely adopt a two-stage procedure, which first estimates the centrality from the observed noisy…
Interbank contagion can theoretically exacerbate losses in a financial system and lead to additional cascade defaults during downturn. In this paper we produce default analysis using both regression and neural network models to verify…
The replacement closeout convention has drawn more and more attention since the 2008 financial crisis. Compared with the conventional risk-free closeout, the replacement closeout convention incorporates the creditworthiness of the…
This work proposes an augmented variant of DebtRank with uncertainty intervals as a method to investigate and assess systemic risk in financial networks, in a context of incomplete data. The algorithm is tested against a default contagion…
This paper introduces forward-looking measures of the network connectedness of fears in the financial system, arising due to the good and bad beliefs of market participants about uncertainty that spreads unequally across a network of banks.…
We study financial systems from a game-theoretic standpoint. A financial system is represented by a network, where nodes correspond to firms, and directed labeled edges correspond to debt contracts between them. The existence of cycles in…
Signed graphs are widely used to analyze complex systems such as social, political, and biological networks. The notion of balance, a key concept of signed graphs, reflects the stability of relationships. While it has been extensively…
Lending decisions are usually made with proprietary models that provide minimally acceptable explanations to users. In a future world without such secrecy, what decision support tools would one want to use for justified lending decisions?…
The 2008 financial crisis illustrated the need for a thorough, functional understanding of systemic risk in strongly interconnected financial structures. Dynamic processes on complex networks being intrinsically difficult, most recent…
Supply chain disruptions constitute an often underestimated risk for financial stability. As in financial networks, systemic risks in production networks arises when the local failure of one firm impacts the production of others and might…
Estimating the probabilities of linkages in a network has gained increasing interest in recent years. One popular model for network analysis is the exchangeable graph model (ExGM) characterized by a two-dimensional function known as a…
In this paper we present a novel algorithm to study the evolution of credit risk across complex multilayer networks. Pagerank-like algorithms allow for the propagation of an influence variable across single networks, and allow quantifying…
The recent financial crisis have generated renewed interests in fragilities of global financial networks among economists and regulatory authorities. In particular, a potential vulnerability of the financial networks is the "financial…
In this paper we consider a mean-field model of interacting diffusions for the monetary reserves in which the reserves are subjected to a self- and cross-exciting shock. This is motivated by the financial acceleration and fire sales…
In this paper, we analyze the effect of a policy recommendation on the performance of an artificial interbank market. Financial institutions stipulate lending agreements following a public recommendation and their individual information.…