Related papers: Network Valuation in Financial Systems
We propose a dynamic network model where two mechanisms control the probability of a link between two nodes: (i) the existence or absence of this link in the past, and (ii) node-specific latent variables (dynamic fitnesses) describing the…
A system for Operational Risk management based on the computational paradigm of Bayesian Networks is presented. The algorithm allows the construction of a Bayesian Network targeted for each bank using only internal loss data, and takes into…
A growing body of studies on systemic risk in financial markets has emphasized the key importance of taking into consideration the complex interconnections among financial institutions. Much effort has been put in modeling the contagion…
Based on an empirical analysis of the network structure of the Austrian inter-bank market, we study the flow of funds through the banking network following exogenous shocks to the system. These shocks are implemented by stochastic changes…
This paper presents a dynamic game framework to analyze the role of large banks in interbank markets. By extending existing models, we incorporate a large bank as a dynamic decision-maker interacting with multiple small banks. Using the…
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…
Percolation is an emblematic model to assess the robustness of interconnected systems when some of their components are corrupted. It is usually investigated in simple scenarios, such as the removal of the system's units in random order, or…
This paper presents a convenient framework for modeling default process and pricing derivative securities involving credit risk. The framework provides an integrated view of credit valuation adjustment by linking distance-to-default,…
We analyze how interdependencies between organizations in financial networks can lead to multiple possible equilibrium outcomes. A multiplicity arises if and only if there exists a certain type of dependency cycle in the network that allows…
In this chapter, an input-output economic model with multiple interactive economic systems is considered. The model captures the multi-dimensional nature of the economic sectors or industries in each economic system, the interdependencies…
The rapid advancement of technology underscores the critical importance of robustness in complex network systems. This paper presents a framework for investigating the structural robustness of interconnected network models. This paper…
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…
We propose a statistical model for weighted temporal networks capable of measuring the level of heterogeneity in a financial system. Our model focuses on the level of diversification of financial institutions; that is, whether they are more…
Interbank markets are fundamental for bank liquidity management. In this paper, we introduce a model of interbank trading with memory. Our model reproduces features of preferential trading patterns in the e-MID market recently empirically…
Financial networks are characterized by complex structures of mutual obligations. These obligations are fulfilled entirely or in part (when defaults occur) via a mechanism called clearing, which determines a set of payments that settle the…
The European sovereign debt crisis has impaired many European banks. The distress on the European banks may transmit worldwide, and result in a large-scale knock-on default of financial institutions. This study presents a computer…
We consider a dynamical model of distress propagation on complex networks, which we apply to the study of financial contagion in networks of banks connected to each other by direct exposures. The model that we consider is an extension of…
The fragility of financial systems was starkly demonstrated in early 2023 through a cascade of major bank failures in the United States, including the second, third, and fourth largest collapses in the US history. The highly interdependent…
Systemic risk is concerned with the instability of a financial system whose members are interdependent in the sense that the failure of a few institutions may trigger a chain of defaults throughout the system. Recently, several systemic…
In general insurance companies, a correct estimation of liabilities plays a key role due to its impact on management and investing decisions. Since the Financial Crisis of 2007-2008 and the strengthening of regulation, the focus is not only…