Related papers: Systemic Risk: Fire-Walling Financial Systems Usin…

Power systems are getting more complex than ever and are consequently operating close to their limit of stability. Moreover, with the increasing demand of renewable wind generation, and the requirement to maintain a secure power system, the…

We test the hypothesis that interconnections across financial institutions can be explained by a diversification motive. This idea stems from the empirical evidence of the existence of long-term exposures that cannot be explained by a…

In a brave new age of global connectivity and e-commerce, interconnections via networks have heightened, creating for both individuals and organizations, a state of complete dependence upon vulnerable systems for storage and transfer of…

Cascading failures, such as bankruptcies and defaults, pose a serious threat for the resilience of the global financial system. Indeed, because of the complex investment and cross-holding relations within the system, failures can occur as a…

Complex systems are characterized by many interacting units that give rise to emergent behavior. A particularly advantageous way to study these systems is through the analysis of the networks that encode the interactions among the system's…

We study the impact of contagion in a network of firms facing credit risk. We describe an intensity based model where the homogeneity assumption is broken by introducing a random environment that makes it possible to take into account the…

A central issue in the study of large complex network systems, such as power grids, financial networks, and ecological systems, is to understand their response to dynamical perturbations. Recent studies recognize that many real networks…

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…

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…

Using particle system methodologies we study the propagation of financial distress in a network of firms facing credit risk. We investigate the phenomenon of a credit crisis and quantify the losses that a bank may suffer in a large credit…

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…

Contagion is an extremely important topic in finance. Contagion is at the core of most major financial crises, in particular the 2008 financial crisis. Although various approaches to quantifying contagion have been proposed, many of them…

Cascading failures and epidemic dynamics, as two successful application realms of network science, are usually investigated separately. How do they affect each other is still one open, interesting problem. In this letter, we couple both…

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…

By treating the financial market as a thermodynamic system, we establish a one-to-one correspondence between thermodynamic variables and economic quantities. Measured by the expected loss under the worst-case scenario, financial risk caused…

For centuries, national economies created wealth by engaging in international trade and production. The resulting international supply networks not only increase wealth for countries, but also create systemic risk: economic shocks,…

Increased coupling between critical infrastructure networks, such as power and communication systems, will have important implications for the reliability and security of these systems. To understand the effects of power-communication…

Interconnected networks describe the dynamics of important systems in a wide range such as biological systems and electrical power grids. Some important features of these systems were successfully studied and understood through simplified…

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…

The financial market is a complex dynamical system composed of a large variety of intricate relationships between several entities, such as banks, corporations and institutions. At the heart of the system lies the stock exchange mechanism,…