Related papers: Reverse stress testing interbank networks
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…
This paper analyzes the bank lending channel and the heterogeneous effects on the euro area, providing evidence that the channel is indeed working. The analysis of the transmission mechanism is based on structural impulse responses to an…
We develop a general approach for stress testing correlations of financial asset portfolios. The correlation matrix of asset returns is specified in a parametric form, where correlations are represented as a function of risk factors, such…
Since the latest financial crisis, the idea of systemic risk has received considerable interest. In particular, contagion effects arising from cross-holdings between interconnected financial firms have been studied extensively. Drawing…
After decades of research, cascading blackouts remain one of the unresolved challenges in the bulk power system operations. A new perspective for measuring the susceptibility of the system to cascading failures is clearly needed. The newly…
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…
We provide an overview of the relationship between financial networks and systemic risk. We present a taxonomy of different types of systemic risk, differentiating between direct externalities between financial organizations (e.g.,…
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…
This paper studies a systemic risk control problem by the central bank, which dynamically plans monetary supply to stabilize the interbank system with borrowing and lending activities. Facing both heterogeneity among banks and the common…
We study a simple, solvable model that allows us to investigate effects of credit contagion on the default probability of individual firms, in both portfolios of firms and on an economy wide scale. While the effect of interactions may be…
In [1] Zawadoski introduces a banking network model in which the asset and counter-party risks are treated separately and the banks hedge their assets risks by appropriate OTC contracts. In his model, each bank has only two counter-party…
Assessing systemic risk in financial markets is of great importance but it often requires data that are unavailable or available at a very low frequency. For this reason, systemic risk assessment with partial information is potentially very…
Large scale networks delineating collective dynamics often exhibit cascading failures across nodes leading to a system-wide collapse. Prominent examples of such phenomena would include collapse on financial and economic networks.…
The recent financial crisis of 2008 and the 2011 indebtedness of Greece highlight the importance of understanding the structure of the global financial network. In this paper we set out to analyze and characterize this network, as captured…
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.…
Digital banking and online communication have made modern bank runs faster and more networked than the canonical queue-at-the-branch setting. While equilibrium models explain why strategic complementarities generate run risk, they offer…
The 2023 U.S. banking crisis propagated not through direct financial linkages but through a high-frequency, information-based contagion channel. This paper moves beyond exploration analysis to test the "too-similar-to-fail" hypothesis,…
We use bank-level balance sheet data from 2005 to 2010 to study interactions within the banking system of five emerging countries: Argentina, Brazil, Mexico, South Africa, and Taiwan. For each country we construct a financial network based…
The concept of resilience embodies the quest towards the ability to sustain shocks, to suffer from these shocks as little as possible, for the shortest time possible, and to recover with the full functionalities that existed before the…
In this paper, we analyze the response of music and book sales to an external field and to buyer herding. We distinguish endogenous and exogenous shocks. We focus on some case studies, whose data have been collected from ranking on…