Related papers: Financial Contagion in a Generalized Stochastic Bl…
Contagion processes are strongly linked to the network structures on which they propagate, and learning these structures is essential for understanding and intervention on complex network processes such as epidemics and (mis)information…
We propose a new model of the liquidity driven banking system focusing on overnight interbank loans. This significant branch of the interbank market is commonly neglected in the banking system modeling and systemic risk analysis. We…
This systemic risk paper introduces inhomogeneous random financial networks (IRFNs). Such models are intended to describe parts, or the entirety, of a highly heterogeneous network of banks and their interconnections, in the global financial…
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…
We introduce a general model for the balance-sheet consistent valuation of interbank claims within an interconnected financial system. Our model represents an extension of clearing models of interdependent liabilities to account for the…
We consider a network of bank holdings, where every holding has two subsidiaries of different types. A subsidiary can trade with another holding's subsidiary of the same type. Holdings support their subsidiaries up to a certain level when…
We address the joint detection-and-attribution problem in cross-border financial contagion through a two-stage framework. The first stage applies wavelet-quantile transfer entropy across time-scales and lower, median, and upper-tail…
Modelling systems with networks has been a powerful approach to tame the complexity of several phenomena. Unfortunately, such an approach is often made difficult by the large number of variables to take into consideration. Methods of…
We study the impact of contagion in a network of firms facing credit risk. We describe an intensity based model where the homogeneity assumption is broken by introducing a random environment that makes it possible to take into account the…
Credit and liquidity risks represent main channels of financial contagion for interbank lending markets. On one hand, banks face potential losses whenever their counterparties are under distress and thus unable to fulfill their obligations.…
The insufficient understanding of the credit network structure was recognized as a key factor for regulators' underestimation of the destructive systematic risk during the financial crisis that started in 2007. The existing credit network…
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…
We propose a novel credit default model that takes into account the impact of macroeconomic information and contagion effect on the defaults of obligors. We use a set-valued Markov chain to model the default process, which is the set of all…
Weighted networks capture the structure of complex systems where interaction strength is meaningful. This information is essential to a large number of processes, such as threshold dynamics, where link weights reflect the amount of…
Financial contagion has been widely recognized as a fundamental risk to the financial system. Particularly potent is price-mediated contagion, wherein forced liquidations by firms depress asset prices and propagate financial stress,…
In this paper, we assess how the stability of financial networks is affected by interconnectedness considering its tiniest variation: the edge. We compute the impact of edges as the percentage difference in the systemic risk (SR) of the…
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…
A major impact of globalization has been the information flow across the financial markets rendering them vulnerable to financial contagion. Research has focused on network analysis techniques to understand the extent and nature of such…
In the new field of financial systemic risk, the network of interbank counterparty relationships can be described as a directed random graph. In "cascade models" of systemic risk, this "skeleton" acts as the medium through which financial…
With a steadily growing population and rapid advancements in technology, the global economy is increasing in size and complexity. This growth exacerbates global vulnerabilities and may lead to unforeseen consequences such as global…