Related papers: The Network Effect in Credit Concentration Risk
Systemic risk refers to the risk that the financial system is susceptible to failures due to the characteristics of the system itself. The tremendous cost of systemic risk requires the design and implementation of tools for the efficient…
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 offer a novel type of network model which can capture the precise structure of a financial market based, for example, on empirical findings. With the attached stochastic framework it is further possible to study how an…
Assessment of risk levels for existing credit accounts is important to the implementation of bank policies and offering financial products. This paper uses cluster analysis of behaviour of credit card accounts to help assess credit risk…
We develop a novel stress-test framework to monitor systemic risk in financial systems. The modular structure of the framework allows to accommodate for a variety of shock scenarios, methods to estimate interbank exposures and mechanisms of…
Internet finance is a new financial model that applies Internet technology to payment, capital borrowing and lending and transaction processing. In order to study the internal risks, this paper uses the Internet financial risk elements as…
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…
In recent years, it has become apparent that an isolated microprudential approach to capital adequacy requirements of individual institutions is insufficient. It can increase the homogeneity of the financial system and ultimately the cost…
As impressively shown by the financial crisis in 2007/08, contagion effects in financial networks harbor a great threat for the stability of the entire system. Without sufficient capital requirements for banks and other financial…
A key question in many network studies is whether the observed correlations between units are primarily due to contagion or latent confounding. Here, we study this question using a segregated graph (Shpitser, 2015) representation of these…
Aggregate and systemic risk in complex systems are emergent phenomena depending on two properties: the idiosyncratic risks of the elements and the topology of the network of interactions among them. While a significant attention has been…
In this brief, we study epidemic spreading dynamics taking place in complex networks. We specifically investigate the effect of synergy, where multiple interactions between nodes result in a combined effect larger than the simple sum of…
In this research, we introduce a robust metric to identify Systemically Important Financial Institution (SIFI) in a financial network by taking into account both common idiosyncratic shocks and contagion through counterparty exposures. We…
This paper leverages linear systems theory to propose a principled measure of complexity for network systems. We focus on a network of first-order scalar linear systems interconnected through a directed graph. By locally filtering out the…
We study a simple, solvable model that allows us to investigate effects of credit contagion on the default probability of individual firms, in both portfolios of firms and on an economy wide scale. While the effect of interactions may be…
Recently, there has been a growing interest in network research, especially in these fields of biology, computer science, and sociology. It is natural to address complex financial issues such as the European sovereign debt crisis from the…
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…
We contribute to the understanding of how systemic risk arises in a network of credit-interlinked agents. Motivated by empirical studies we formulate a network model which, despite its simplicity, depicts the nature of interbank markets…
The scope of financial systemic risk research encompasses a wide range of interbank channels and effects, including asset correlation shocks, default contagion, illiquidity contagion, and asset fire sales. This paper introduces a financial…
This paper proposes RiskRank as a joint measure of cyclical and cross-sectional systemic risk. RiskRank is a general-purpose aggregation operator that concurrently accounts for risk levels for individual entities and their…