Related papers: Intervention On Default Contagion Under Partial In…
We analyze the Bass and SI models for the spreading of innovations and epidemics, respectively, on homogeneous complete networks, circular networks, and heterogeneous complete networks with two homogeneous groups. We allow the network…
Groups of enterprises can serve as guarantees for one another and form complex networks when obtaining loans from commercial banks. During economic slowdowns, corporate default may spread like a virus and lead to large-scale defaults or…
We examine optimal regulation of financial networks with debt interdependencies between financial firms. We first show that firms often have an incentive to choose excessively risky portfolios and overly correlate their portfolios with…
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…
Many interventions, such as vaccines in clinical trials or coupons in online marketplaces, must be assigned sequentially without full knowledge of their effects. Multi-armed bandit algorithms have proven successful in such settings.…
We analyze cascades of defaults in an interbank loan market. The novel feature of this study is that the network structure and the size distribution of banks are derived from empirical data. We find that the ability of a defaulted…
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…
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.…
We study binary state dynamics on a network where each node acts in response to the average state of its neighborhood. Allowing varying amounts of stochasticity in both the network and node responses, we find different outcomes in random…
This paper investigates optimization policies for resource distribution in network epidemics using a model that derives from the classical Polya process. The basic mechanics of this model, called the Polya network contagion process, are…
Interbank deposits (loans and credits) are quite common in banking system all over the world. Such interbank co-operation is profitable for banks but it can also lead to collective financial failures. In this paper we introduce a new model…
We test the hypothesis that interconnections across financial institutions can be explained by a diversification motive. This idea stems from the empirical evidence of the existence of long-term exposures that cannot be explained by a…
Interference occurs when the potential outcomes of a unit depend on the treatment of others. Interference can be highly heterogeneous, where treating certain individuals might have a larger effect on the population's overall outcome. A…
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…
We investigate the containment of epidemic spreading in networks from a normative point of view. We consider a susceptible/infected model in which agents can invest in order to reduce the contagiousness of network links. In this setting, we…
Individual-based models of contagious processes are useful for predicting epidemic trajectories and informing intervention strategies. In such models, the incorporation of contact network information can capture the non-randomness and…
The scope of financial systemic risk research encompasses a wide range of interbank channels and effects, including asset correlation shocks, default contagion, illiquidity contagion, and asset fire sales. This paper introduces a financial…
We propose and study a compartmental model for epidemiology with human behavioral effects. Specifically, our model incorporates governmental prevention measures aimed at lowering the disease infection rate, but we split the population into…
We introduce a dynamic and stochastic interbank model with an endogenous notion of distress contagion, arising from rational worries about future defaults and ensuing losses. This entails a mark-to-market valuation adjustment for interbank…
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…