Related papers: What is the Minimal Systemic Risk in Financial Exp…
Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk…
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…
Evaluation of systemic risk in networks of financial institutions in general requires information of inter-institution financial exposures. In the framework of Debt Rank algorithm, we introduce an approximate method of systemic risk…
We provide an overview of the relationship between financial networks and systemic risk. We present a taxonomy of different types of systemic risk, differentiating between direct externalities between financial organizations (e.g.,…
We study the difference between the level of systemic risk that is empirically measured on an interbank network and the risk that can be deduced from the balance sheets composition of the participating banks. Using generalised DebtRank…
The global financial system can be represented as a large complex network in which banks, hedge funds and other financial institutions are interconnected to each other through visible and invisible financial linkages. Recently, a lot of…
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…
The question of how to stabilize financial systems has attracted considerable attention since the global financial crisis of 2007-2009. Recently, Beale et al. ("Individual versus systemic risk and the regulator's dilemma", Proc Natl Acad…
Research capacity is critical in understanding systemic risk and informing new regulation. Banking regulation has not kept pace with all the complexities of financial innovation. The academic literature on systemic risk is rapidly…
A growing body of studies on systemic risk in financial markets has emphasized the key importance of taking into consideration the complex interconnections among financial institutions. Much effort has been put in modeling the contagion…
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…
The latest financial crisis has painfully revealed the dangers arising from a globally interconnected financial system. Conventional approaches based on the notion of the existence of equilibrium and those which rely on statistical…
Complex non-linear interactions between banks and assets we model by two time-dependent Erd\H{o}s Renyi network models where each node, representing bank, can invest either to a single asset (model I) or multiple assets (model II). We use…
In this paper we estimate the propagation of liquidity shocks through interbank markets when the information about the underlying credit network is incomplete. We show that techniques such as Maximum Entropy currently used to reconstruct…
Systemic liquidity risk, defined by the IMF as "the risk of simultaneous liquidity difficulties at multiple financial institutions", is a key topic in macroprudential policy and financial stress analysis. Specialized models to simulate…
Financial markets are exposed to systemic risk, the risk that a substantial fraction of the system ceases to function and collapses. Systemic risk can propagate through different mechanisms and channels of contagion. One important form of…
We examine optimal regulation of financial networks with debt interdependencies between financial firms. We first show that firms often have an incentive to choose excessively risky portfolios and overly correlate their portfolios with…
In this study, we propose a new multi-objective portfolio optimization with idiosyncratic and systemic risks for financial networks. The two risks are measured by the idiosyncratic variance and the network clustering coefficient derived…
Modern society heavily relies on strongly connected, socio-technical systems. As a result, distinct risks threatening the operation of individual systems can no longer be treated in isolation. Consequently, risk experts are actively seeking…
The networked nature of supply chains makes them susceptible to systemic risk, where local firm failures can propagate through firm interdependencies that can lead to cascading supply chain disruptions. The systemic risk of supply chains…