Related papers: Obligations with Physical Delivery in a Multi-Laye…
This paper develops a continuous functional framework for analyzing contagion dynamics in financial networks, extending the Navier-Stokes-based approach to network-structured spatial processes. We model financial distress propagation as a…
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 complex interactions between algorithmic trading agents can have a severe influence on the functioning of our economy, as witnessed by recent banking crises and trading anomalies. A common phenomenon in these situations are fire sales,…
In this paper, I consider a simple heterogeneous agents model of a production economy with uncertain climate change and examine constrained efficient carbon taxation. If there are frictionless, complete financial markets, the simple model…
The purpose of this paper is to advance the understanding of the conditions that give rise to flash crash contagion, particularly with respect to overlapping asset portfolio crowding. To this end, we designed, implemented, and assessed a…
We demonstrate using multi-layered networks, the existence of an empirical linkage between the dynamics of the financial network constructed from the market indices and the macroeconomic networks constructed from macroeconomic variables…
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…
The stability of a complex financial system may be assessed by measuring risk contagion between various financial institutions with relatively high exposure. We consider a financial network model using a bipartite graph of financial…
Various social, financial, biological and technological systems can be modeled by interdependent networks. It has been assumed that in order to remain functional, nodes in one network must receive the support from nodes belonging to…
Financial network games model payment incentives in the context of networked liabilities. In this paper, we advance the understanding of incentives in financial networks in two important directions: minimal clearing (arising, e.g., as a…
Network effects are the added value derived solely from the popularity of a product in an economic market. Using agent-based models inspired by statistical physics, we propose a minimal theory of a competitive market for (nearly)…
In a money exchange process involving a seller and a buyer, we develop a straightforward model encompassing conservative, non-conservative, and systems with or without debt. Our model integrates the Fermi function to capture the behavior of…
This paper develops a model-free framework for static fixed-income pricing and the replication of liability cash flows. We show that the absence of static arbitrage across a universe of fixed-income instruments is equivalent to the…
In normal times, it is assumed that financial institutions operating in non-overlapping sectors have complementary and distinct outcomes, typically reflected in mostly uncorrelated outcomes and asset returns. Such is the reasoning behind…
We propose a minimal model of the secured interbank network able to shed light on recent money markets puzzles. We find that excess liquidity emerges due to the interactions between the reserves and liquidity ratio constraints; the…
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…
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…
We propose a novel approach and an empirical procedure to test direct contagion of growth rate in a trade credit network of firms. Our hypotheses are that the use of trade credit contributes to contagion (from many customers to a single…
We consider a model of financial contagion in a bipartite network of assets and banks recently introduced in the literature, and we study the effect of power law distributions of degree and balance-sheet size on the stability of the system.…
Complex non-linear interactions between banks and assets we model by two time-dependent Erd\H{o}s Renyi network models where each node, representing bank, can invest either to a single asset (model I) or multiple assets (model II). We use…