Related papers: Controlling systemic risk - network structures tha…
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…
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 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…
The downside risk of a portfolio of (equity)assets is generally substantially higher than the downside risk of its components. In particular in times of crises when assets tend to have high correlation, the understanding of this difference…
The complexity of financial markets arise from the strategic interactions among agents trading stocks, which manifest in the form of vibrant correlation patterns among stock prices. Over the past few decades, complex financial markets have…
Robust control theory has been successfully applied to numerous real-world problems using a small set of devices called {\it controllers}. However, the real systems represented by networks contain unreliable components and modern robust…
This chapter reviews key contributions of complexity science to the study of systemic risk in financial systems. The focus is on network models of financial contagion, where I explore various mechanisms of shock propagation, such as…
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…
This paper introduces forward-looking measures of the network connectedness of fears in the financial system, arising due to the good and bad beliefs of market participants about uncertainty that spreads unequally across a network of banks.…
The 2008 financial crisis illustrated the need for a thorough, functional understanding of systemic risk in strongly interconnected financial structures. Dynamic processes on complex networks being intrinsically difficult, most recent…
Measuring systemic risk or fragility of financial systems is a ubiquitous task of fundamental importance in analyzing market efficiency, portfolio allocation, and containment of financial contagions. Recent attempts have shown that…
This paper investigates systemic risk measures for stochastic financial networks of explicitly modelled bilateral liabilities. We extend the notion of systemic risk measures from Biagini, Fouque, Fritelli and Meyer-Brandis (2019) to graph…
We estimate generic statistical properties of a structural credit risk model by considering an ensemble of correlation matrices. This ensemble is set up by Random Matrix Theory. We demonstrate analytically that the presence of correlations…
The global financial crisis in 2007-2009 demonstrated that systemic risk can spread all over the world through a complex web of financial linkages, yet we still lack fundamental knowledge about the evolution of the financial web. In…
Financial networks are dynamic. To assess their systemic importance to the world-wide economic network and avert losses we need models that take the time variations of the links and nodes into account. Using the methodology of classical…
We introduce a neural network approach for assessing the risk of a portfolio of assets and liabilities over a given time period. This requires a conditional valuation of the portfolio given the state of the world at a later time, a problem…
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…
The stochastic block model is able to generate different network partitions, ranging from traditional assortative communities to disassortative structures. Since the degree-corrected stochastic block model does not specify which mixing…
The main contribution of the paper is to employ the financial market network as a useful tool to improve the portfolio selection process, where nodes indicate securities and edges capture the dependence structure of the system. Three…
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…