Related papers: A framework for simulating systemic risk and its a…
We study cascades on a two-layer multiplex network, with asymmetric feedback that depends on the coupling strength between the layers. Based on an analytical branching process approximation, we calculate the systemic risk measured by the…
This work explores the characteristics of financial contagion in networks whose links distributions approaches a power law, using a model that defines banks balance sheets from information of network connectivity. By varying the parameters…
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…
Banks in the interbank network can not assess the true risks associated with lending to other banks in the network, unless they have full information on the riskiness of all the other banks. These risks can be estimated by using network…
When banks extend loans to each other, they generate a negative externality in the form of systemic risk. They create a network of interbank exposures by which they expose other banks to potential insolvency cascades. In this paper, we show…
An asset network systemic risk (ANWSER) model is presented to investigate the impact of how shadow banks are intermingled in a financial system on the severity of financial contagion. Particularly, the focus of this study is the impact of…
As economic entities become increasingly interconnected, a shock in a financial network can provoke significant cascading failures throughout the system. To study the systemic risk of financial systems, we create a bi-partite banking…
A simple banking network model is proposed which features multiple waves of bank defaults and is analytically solvable in the limiting case of an infinitely large homogeneous network. The model is a collection of nodes representing…
In the context of understanding the nature of the risk transformation process of the financial system we propose an iterative risk-trading game between several agents who build their trading strategies based on a general utility setting.…
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…
We present an analytical model to study the role of expectation feedbacks and overlapping portfolios on systemic stability of financial systems. Building on [Corsi et al., 2016], we model a set of financial institutions having Value at Risk…
The recent financial crisis has stressed the need to understand financial systems as networks of interdependent countries, where cross-border financial linkages play the fundamental role. It has also been emphasized that the relevance of…
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…
Measurement and management of credit concentration risk is critical for banks and relevant for micro-prudential requirements. While several methods exist for measuring credit concentration risk within institutions, the systemic effect of…
The inability to see and quantify systemic financial risk comes at an immense social cost. Systemic risk in the financial system arises to a large extent as a consequence of the interconnectedness of its institutions, which are linked…
Risks threatening modern societies form an intricately interconnected network that often underlies crisis situations. Yet, little is known about how risk materializations in distinct domains influence each other. Here we present an approach…
We consider the problem of governing systemic risk in a banking system model. The banking system model consists in an initial value problem for a system of stochastic differential equations whose dependent variables are the log-monetary…
The recent financial crisis have generated renewed interests in fragilities of global financial networks among economists and regulatory authorities. In particular, a potential vulnerability of the financial networks is the "financial…
Systemic risk is a rapidly developing area of research. Classical financial models often do not adequately reflect the phenomena of bubbles, crises, and transitions between them during credit cycles. To study very improbable events,…
Economic interdependencies have become increasingly present in globalized production, financial and trade systems. While establishing interdependencies among economic agents is crucial for the production of complex products, they may also…