Related papers: The Network Effect in Credit Concentration Risk
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…
The failure of key financial institutions may accelerate risk contagion due to their interconnections within the system. In this paper, we propose a robust portfolio strategy to mitigate systemic risks during extreme events. We use the…
We introduce a probabilistic framework that represents stylized banking networks with the aim of predicting the size of contagion events. Most previous work on random financial networks assumes independent connections between banks, whereas…
We present an analytical model to study the role of expectation feedbacks and overlapping portfolios on systemic stability of financial systems. Building on [Corsi et al., 2016], we model a set of financial institutions having Value at Risk…
Networks of financial exposures are the key propagators of risk and distress among banks, but their empirical structure is not publicly available because of confidentiality. This limitation has triggered the development of methods of…
A probabilistic framework is introduced that represents stylized banking networks and aims to predict the size of contagion events. In contrast to previous work on random financial networks, which assumes independent connections between…
Interbank lending and borrowing occur when financial institutions seek to settle and refinance their mutual positions over time and circumstances. This interactive process involves money creation at the aggregate level. Coordination…
Realistic credit risk assessment, the estimation of losses from counterparty's failure, is central for the financial stability. Credit risk models focus on the financial conditions of borrowers and only marginally consider other risks from…
Many real world systems can be expressed as complex networks of interconnected nodes. It is frequently important to be able to quantify the relative importance of the various nodes in the network, a task accomplished by defining some…
Groups of enterprises can serve as guarantees for one another and form complex networks when obtaining loans from commercial banks. During economic slowdowns, corporate default may spread like a virus and lead to large-scale defaults or…
An interbank market lets participants pool the risk arising from the combination of illiquid investments and random withdrawals by depositors. But it also creates the potential for one bank's failure to trigger off avalanches of further…
Assessing the resilience of the economy requires accounting for its intrinsic multi-layer nature, by assessing for instance how disruptions at the firm level spread through the production network and propagate to the banking sector. Methods…
Risk diversification is the basis of insurance and investment. It is thus crucial to study the effects that could limit it. One of them is the existence of systemic risk that affects all the policies at the same time. We introduce here a…
Following several episodes of financial market turmoil in recent decades, changes in systemic risk have drawn growing attention. Therefore, we propose surveillance schemes for systemic risk, which allow to detect misspecified systemic risk…
Banking system crises are complex events that in a short span of time can inflict extensive damage to banks themselves and to the external economy. The crisis literature has so far identified a number of distinct effects or channels that…
The study of systemic risk is often presented through the analysis of several measures referring to quantities used by practitioners and policy makers. Almost invariably, those measures evaluate the size of the impact that exogenous events…
We consider a large collection of dynamically interacting components defined on a weighted directed graph determining the impact of default of one component to another one. We prove a law of large numbers for the empirical measure capturing…
In this paper, we propose a novel statistic of networks, the normalized clustering coefficient, which is a modified version of the clustering coefficient that is robust to network size, network density and degree heterogeneity under…
In this paper we study the effect of network structure between agents and objects on measures for systemic risk. We model the influence of sharing large exogeneous losses to the financial or (re)insuance market by a bipartite graph. Using…
We derive a composite centrality measure for general weighted and directed complex networks, based on measure standardisation and invariant statistical inheritance schemes. Different schemes generate different intermediate abstract measures…