Related papers: Rethinking Financial Contagion
In this paper we introduce a generalized extension of the Eisenberg-Noe model of financial contagion to allow for time dynamics of the interbank liabilities, including a dynamic examination of default risk. This framework separates the cash…
In spite of the growing theoretical literature on cascades of failures in interbank lending networks, empirical results seem to suggest that networks of direct exposures are not the major channel of financial contagion. In this paper we…
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…
A probabilistic framework is introduced that represents stylized banking networks and aims to predict the size of contagion events. In contrast to previous work on random financial networks, which assumes independent connections between…
We consider a network of bank holdings, where every holding has two subsidiaries of different types. A subsidiary can trade with another holding's subsidiary of the same type. Holdings support their subsidiaries up to a certain level when…
In this paper we analyze the resilience of a network of banks to joint price fluctuations of the external assets in which they have shared exposures, and evaluate the worst-case effects of the possible default contagion. Indeed, when the…
Assessing the stability of economic systems is a fundamental research focus in economics, that has become increasingly interdisciplinary in the currently troubled economic situation. In particular, much attention has been devoted to the…
In this paper, we introduce an impact centrality measure to evaluate shock propagation on financial networks capturing a notion of contagion and systemic risk contributions, permitting comparisons of these risks over time. In addition, we…
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…
Realistic credit risk assessment, the estimation of losses from counterparty's failure, is central for the financial stability. Credit risk models focus on the financial conditions of borrowers and only marginally consider other risks from…
In this paper we study the implications of contingent payments on the clearing wealth in a network model of financial contagion. We consider an extension of the Eisenberg-Noe financial contagion model in which the nominal interbank…
Internet finance is a new financial model that applies Internet technology to payment, capital borrowing and lending and transaction processing. In order to study the internal risks, this paper uses the Internet financial risk elements as…
We reverse engineer dynamics of financial contagion to find the scenario of smallest exogenous shock that, should it occur, would lead to a given final systemic loss. This reverse stress test can be used to identify the potential triggers…
We introduce a probabilistic framework that represents stylized banking networks with the aim of predicting the size of contagion events. Most previous work on random financial networks assumes independent connections between banks, whereas…
The weighted and directed network of countries based on the number of overseas banks is analyzed in terms of its fragility to the banking crisis of one country. We use two different models to describe transmission of shocks, one local and…
The recent financial crisis has stressed the need to understand financial systems as networks of interdependent countries, where cross-border financial linkages play the fundamental role. It has also been emphasized that the relevance of…
Price-mediated contagion occurs when a positive feedback loop develops following a drop in asset prices which forces banks and other financial institutions to sell their holdings. Prior studies of such events fix the level of market…
In this work we introduce a model of default contagion that combines the approaches of Eisenberg-Noe interbank networks and dynamic mean field interactions. The proposed contagion mechanism provides an endogenous rule for early defaults in…
We contribute to the understanding of how systemic risk arises in a network of credit-interlinked agents. Motivated by empirical studies we formulate a network model which, despite its simplicity, depicts the nature of interbank markets…
The question of how to stabilize financial systems has attracted considerable attention since the global financial crisis of 2007-2009. Recently, Beale et al. ("Individual versus systemic risk and the regulator's dilemma", Proc Natl Acad…