Related papers: Quantification of systemic risk from overlapping p…
Much research in systemic risk is focused on default contagion. While this demands an understanding of valuation, fewer articles specifically deal with the existence, the uniqueness, and the computation of equilibrium prices in structural…
In this research, we introduce a robust metric to identify Systemically Important Financial Institution (SIFI) in a financial network by taking into account both common idiosyncratic shocks and contagion through counterparty exposures. We…
The vast majority of market impact studies assess each product individually, and the interactions between the different order flows are disregarded. This strong approximation may lead to an underestimation of trading costs and possible…
The importance of adequately modeling credit risk has once again been highlighted in the recent financial crisis. Defaults tend to cluster around times of economic stress due to poor macro-economic conditions, {\em but also} by directly…
The financial crisis has dramatically demonstrated that the traditional approach to apply univariate monetary risk measures to single institutions does not capture sufficiently the perilous systemic risk that is generated by the…
I show the equivalence between a model of financial contagion and the threshold model of global cascades proposed by Watts (2002). The model financial network comprises banks that hold risky external assets as well as interbank assets. It…
The global balance index is used in the network literature to quantify how balanced a signed network is. In this paper we show that the global balance index of financial correlation networks can be used as a systemic risk measure. We define…
Financial markets are exposed to systemic risk (SR), the risk that a major fraction of the system ceases to function, and collapses. It has recently become possible to quantify SR in terms of underlying financial networks where nodes…
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…
The increasing integration of world economies, which organize in complex multilayer networks of interactions, is one of the critical factors for the global propagation of economic crises. We adopt the network science approach to quantify…
We study how the phenomenon of contagion can take place in the network of the world's stock exchanges due to the behavioral trait "blindeness to small changes". On large scale individual, the delay in the collective response may…
Systemic risk in banking systems remains a crucial issue that it has not been completely understood. In our toy model, banks are exposed to two sources of risks, namely, market risk from their investments in assets external to the banking…
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…
This paper studies systemic-risk connectedness in the European insurance sector at three levels of granularity: across major segments of financial markets, across insurance subsectors, and across individual insurance companies. Using a…
Systemic risk measures were introduced to capture the global risk and the corresponding contagion effects that is generated by an interconnected system of financial institutions. To this purpose, two approaches were suggested. In the first…
Following several episodes of financial market turmoil in recent decades, changes in systemic risk have drawn growing attention. Therefore, we propose surveillance schemes for systemic risk, which allow to detect misspecified systemic risk…
The instability of historical risk factor correlations renders their use in estimating portfolio risk extremely questionable. In periods of market stress correlations of risk factors have a tendency to quickly go well beyond estimated…
We address a fundamental problem that is systematically encountered when modeling complex systems: the limitedness of the information available. In the case of economic and financial networks, privacy issues severely limit the information…
We study the mean field approximation of a recent model of cascades on networks relevant to the investigation of systemic risk control in financial networks. In the model, the hypothesis of a trend reinforcement in the stochastic process…
Propagation of balance-sheet or cash-flow insolvency across financial institutions may be modeled as a cascade process on a network representing their mutual exposures. We derive rigorous asymptotic results for the magnitude of contagion in…