Related papers: A framework for simulating systemic risk and its a…
We derive the default cascade model and the fire-sale spillover model in a unified interdependent framework. The interactions among banks include not only direct cross-holding, but also indirect dependency by holding mutual assets outside…
In this paper we analyze the resilience of a network of banks to joint price fluctuations of the external assets in which they have shared exposures, and evaluate the worst-case effects of the possible default contagion. Indeed, when the…
We use bank-level balance sheet data from 2005 to 2010 to study interactions within the banking system of five emerging countries: Argentina, Brazil, Mexico, South Africa, and Taiwan. For each country we construct a financial network based…
Spreading broadly refers to the notion of an entity propagating throughout a networked system via its interacting components. Evidence of its ubiquity and severity can be seen in a range of phenomena, from disease epidemics to financial…
This paper presents a dynamic game framework to analyze the role of large banks in interbank markets. By extending existing models, we incorporate a large bank as a dynamic decision-maker interacting with multiple small banks. Using the…
We reverse engineer dynamics of financial contagion to find the scenario of smallest exogenous shock that, should it occur, would lead to a given final systemic loss. This reverse stress test can be used to identify the potential triggers…
In a network, a local disturbance can propagate and eventually cause a substantial part of the system to fail, in cascade events that are easy to conceptualize but extraordinarily difficult to predict. Here, we develop a statistical…
We propose that a tree-like hierarchical structure represents a simple and effective way to model the emergent behaviour of financial markets, especially markets where there exists a pronounced intersection between social media influences…
Damage scenarios for large networks are considered. The cascade scenario is described by means of powers of adjacency matrix. More difficult probabilistic variants of the large network damage are modeling by Markov chains. For reliability…
In this article we propose a novel measure of systemic risk in the context of financial networks. To this aim, we provide a definition of systemic risk which is based on the structure, developed at different levels, of clustered neighbours…
How, and to what extent, does an interconnected financial system endogenously amplify external shocks? This paper attempts to reconcile some apparently different views emerged after the 2008 crisis regarding the nature and the relevance of…
Stochastic processes can model many emerging phenomena on networks, like the spread of computer viruses, rumors, or infectious diseases. Understanding the dynamics of such stochastic spreading processes is therefore of fundamental interest.…
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…
Network analysis provides powerful tools to learn about a variety of social systems. However, most analyses implicitly assume that the considered relational data is error-free, reliable and accurately reflects the system to be analysed.…
Cascading chains of events are a salient feature of many real-world social, biological, and financial networks. In social networks, social reciprocity accounts for retaliations in gang interactions, proxy wars in nation-state conflicts, or…
The role of Network Theory in the study of the financial crisis has been widely spotted in the latest years. It has been shown how the network topology and the dynamics running on top of it can trigger the outbreak of large systemic crisis.…
In this paper, a new reliability model has been developed for a single system degrading stochastically which experiences soft and hard failure. Soft failure occurs when the physical deterioration level of the system is greater than a…
We discuss the systemic risk implied by the interbank exposures reconstructed with the maximum entropy method. The maximum entropy method severely underestimates the risk of interbank contagion by assuming a fully connected network, while…
Supply chains need to balance competing objectives; in addition to efficiency they need to be resilient to adversarial and environmental interference, and robust to uncertainties in long term demand. Significant research has been conducted…
The importance of modeling the spread of epidemics through a population has led to the development of mathematical models for infectious disease propagation. A number of empirical studies have collected and analyzed data on contacts between…