Related papers: Network Valuation in Financial Systems

Sustainable financial markets play an important role in the functioning of human society. Still, the detection and prediction of risk in financial markets remain challenging and draw much attention from the scientific community. Here we…

The instability of the financial system as experienced in recent years and in previous periods is often linked to credit defaults, i.e., to the failure of obligors to make promised payments. Given the large number of credit contracts, this…

The combination of the network theoretic approach with recently available abundant economic data leads to the development of novel analytic and computational tools for modelling and forecasting key economic indicators. The main idea is to…

The structure of many financial networks is protected by privacy and has to be inferred from aggregate observables. Here we consider one of the most successful network reconstruction methods, producing random graphs with desired link…

In the aftermath of the financial crisis, supervisory authorities have considerably altered the mode of operation of financial stress testing. Despite these efforts, significant concerns and extensive criticism have been raised by market…

This paper investigates whether a financial system can be made more stable if financial institutions share risk by exchanging contingent convertible (CoCo) debt obligations. The question is framed in a financial network model of debt and…

Financial markets are exposed to systemic risk (SR), the risk that a major fraction of the system ceases to function, and collapses. It has recently become possible to quantify SR in terms of underlying financial networks where nodes…

A fundamental problem in studying and modeling economic and financial systems is represented by privacy issues, which put severe limitations on the amount of accessible information. Here we introduce a novel, highly nontrivial method to…

We present an exploration of a reputation system based on explicit ratings weighted by the values of corresponding financial transactions from the perspective of its ability to grant "security" to market participants by protecting them from…

Common asset holdings are widely believed to have been the primary vector of contagion in the recent financial crisis. We develop a network approach to the amplification of financial contagion due to the combination of overlapping…

We study the formation of an optimal interbank network in a model where banks control both their supply of liquidity, through cash reserves, and their exposures to other banks' risky projects. The value of each bank's project may suddenly…

Balance theory explains the forces behind the structure of social systems, which are commonly modeled as static undirected signed networks. We expand this modeling approach to incorporate directionality of edges, and consider three levels…

Open Banking powered machine learning applications require novel robustness approaches to deal with challenging stress and failure scenarios. In this paper we propose an hierarchical fallback architecture for improving robustness in high…

The inability to see and quantify systemic financial risk comes at an immense social cost. Systemic risk in the financial system arises to a large extent as a consequence of the interconnectedness of its institutions, which are linked…

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…

Threats on the stability of a financial system may severely affect the functioning of the entire economy, and thus considerable emphasis is placed on the analyzing the cause and effect of such threats. The financial crisis in the current…

This paper leverages linear systems theory to propose a principled measure of complexity for network systems. We focus on a network of first-order scalar linear systems interconnected through a directed graph. By locally filtering out the…

In this paper, we assess how the stability of financial networks is affected by interconnectedness considering its tiniest variation: the edge. We compute the impact of edges as the percentage difference in the systemic risk (SR) of the…

Modern financial networks are highly connected and result in complex interdependencies of the involved institutions. In the prominent Eisenberg-Noe model, a fundamental aspect is clearing -- to determine the amount of assets available to…

Financial markets are exposed to systemic risk, the risk that a substantial fraction of the system ceases to function and collapses. Systemic risk can propagate through different mechanisms and channels of contagion. One important form of…