Related papers: A default system with overspilling contagion
In this paper we propose a copula contagion mixture model for correlated default times. The model includes the well known factor, copula, and contagion models as its special cases. The key advantage of such a model is that we can study the…
In the context of micro-finance, a group of individuals undertake business projects that may interfere with one another. A contagious default happens if one person's project failure leads to the default of another group member. In this…
We propose a model and an estimation technique to distinguish systemic risk and contagion in credit risk. The main idea is to assume, for a set of $d$ obligors, a set of $d$ idiosyncratic shocks and a shock that triggers the default of all…
The current global financial system forms a highly interconnected network where a default in one of its nodes can propagate to many other nodes, causing a catastrophic avalanche effect. In this paper we consider the problem of reducing the…
This article extends the autoregressive count time series model class by allowing for a model with regimes, that is, some of the parameters in the model depend on the state of an unobserved Markov chain. We develop a quasi-maximum…
We introduce a mathematical model that combines the concepts of complex contagion with payoff-biased imitation, to describe how social behaviors spread through a population. Traditional models of social learning by imitation are based on…
We study large deviations and rare default clustering events in a dynamic large heterogeneous portfolio of interconnected components. Defaults come as Poisson events and the default intensities of the different components in the system…
This paper introduces a novel framework to study default dependence and systemic risk in a financial network that evolves over time. We analyse several indicators of risk, and develop a new latent space model to assess the health of key…
Models of contagion arise broadly both in the biological and social sciences, with applications ranging from the transmission of infectious diseases to the diffusion of innovations and the spread of cultural fads. In this Letter, we…
We propose a dynamic mean field model for `systemic risk' in large financial systems, which we derive from a system of interacting diffusions on the positive half-line with an absorbing boundary at the origin. These diffusions represent the…
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…
Information and individual activities often spread globally through the network of social ties. While social contagion phenomena have been extensively studied within the framework of threshold models, it is common to make an assumption that…
We consider multiple diseases spreading in a static Configuration Model network. We make standard assumptions that infection transmits from neighbor to neighbor at a disease-specific rate and infected individuals recover at a…
This chapter reviews key contributions of complexity science to the study of systemic risk in financial systems. The focus is on network models of financial contagion, where I explore various mechanisms of shock propagation, such as…
In this paper, we propose a two-sector Markovian infectious model, which is an extension of Greenwood's model. The central idea of this model is that the causality of defaults of two sectors is in both direction, which enrich dependence…
Banking system crises are complex events that in a short span of time can inflict extensive damage to banks themselves and to the external economy. The crisis literature has so far identified a number of distinct effects or channels that…
Social contagion is a ubiquitous and fundamental process that drives individual and social changes. Although social contagion arises as a result of cognitive processes and biases, the integration of cognitive mechanisms with the theory of…
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…
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 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…