Related papers: The Network Effect in Credit Concentration Risk
Cybersecurity risk is commonly expressed through impact and likelihood, yet likelihood remains difficult to estimate because cyber incidents are underreported, heterogeneous datasets are weakly comparable, and attacker behaviour changes…
Credit risk prediction is an effective way of evaluating whether a potential borrower will repay a loan, particularly in peer-to-peer lending where class imbalance problems are prevalent. However, few credit risk prediction models for…
The policy objective of safeguarding financial stability has stimulated a wave of research on systemic risk analytics, yet it still faces challenges in measurability. This paper models systemic risk by tapping into expert knowledge of…
Supply chain disruptions constitute an often underestimated risk for financial stability. As in financial networks, systemic risks in production networks arises when the local failure of one firm impacts the production of others and might…
Assessing systemic risk in financial markets is of great importance but it often requires data that are unavailable or available at a very low frequency. For this reason, systemic risk assessment with partial information is potentially very…
Propagation of balance-sheet or cash-flow insolvency across financial institutions may be modeled as a cascade process on a network representing their mutual exposures. We derive rigorous asymptotic results for the magnitude of contagion in…
It had been believed in the conventional practice that the risk of a bank going bankrupt is lessened in a straightforward manner by transferring the risk of loan defaults. But the failure of American International Group in 2008 posed a more…
Recent studies have shown that a system composed from several randomly interdependent networks is extremely vulnerable to random failure. However, real interdependent networks are usually not randomly interdependent, rather a pair of…
Systemic risk measures were introduced to capture the global risk and the corresponding contagion effects that is generated by an interconnected system of financial institutions. To this purpose, two approaches were suggested. In the first…
The instability of historical risk factor correlations renders their use in estimating portfolio risk extremely questionable. In periods of market stress correlations of risk factors have a tendency to quickly go well beyond estimated…
The increasing integration of world economies, which organize in complex multilayer networks of interactions, is one of the critical factors for the global propagation of economic crises. We adopt the network science approach to quantify…
We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump--diffusion process for the risk factors, i.e. for the company assets. We also include correlations…
When banks choose similar investment strategies the financial system becomes vulnerable to common shocks. We model a simple financial system in which banks decide about their investment strategy based on a private belief about the state of…
Cumulative effect in social contagions underlies many studies on the spread of innovation, behaviors, and influence. However, few large-scale empirical studies are conducted to validate the existence of cumulative effect in the information…
This work deals with the issue of assessing the influence of a node in the entire network and in the subnetwork to which it belongs as well, adapting the classical idea of vertex centrality. We provide a general definition of relative…
Bayesian hierarchical models are a methodology for aggregation and synthesis of data from heterogeneous settings, used widely in statistics and other disciplines. I apply this framework to the evidence from 7 randomized experiments of…
Causal inference on populations embedded in social networks poses technical challenges, since the typical no interference assumption frequently does not hold. Existing methods developed in the context of network interference rely upon the…
We study how network structure affects the dynamics of collateral in presence of rehypothecation. We build a simple model wherein banks interact via chains of repo contracts and use their proprietary collateral or re-use the collateral…
The purpose of this paper is to advance the understanding of the conditions that give rise to flash crash contagion, particularly with respect to overlapping asset portfolio crowding. To this end, we designed, implemented, and assessed a…
Since 2008, the network analysis of financial systems is one of the most important subjects in economics. In this paper, we have used the complexity approach and Random Matrix Theory (RMT) for analyzing the global banking network. By…