Related papers: Suffocating Fire Sales
The global financial crisis in 2007-2009 demonstrated that systemic risk can spread all over the world through a complex web of financial linkages, yet we still lack fundamental knowledge about the evolution of the financial web. In…
We study the mean field approximation of a recent model of cascades on networks relevant to the investigation of systemic risk control in financial networks. In the model, the hypothesis of a trend reinforcement in the stochastic process…
The DebtRank algorithm has been increasingly investigated as a method to estimate the impact of shocks in financial networks, as it overcomes the limitations of the traditional default-cascade approaches. Here we formulate a dynamical…
The understanding of complex systems has become a central issue because complex systems exist in a wide range of scientific disciplines. Time series are typical experimental results we have about complex systems. In the analysis of such…
Assessing small-signal stability of power systems composed of thousands of interacting generators is a computationally challenging task. To reduce the computational burden, this paper introduces a novel condition to assess and certify…
Financial markets have been extensively studied as highly complex evolving systems. In this paper, we quantify financial price fluctuations through a coupled dynamical system composed of phase oscillators. We find a Financial Coherence and…
We design a fixed-price auction mechanism for a seller to sell multiple items in a tree-structured market. The buyers have independently drawn valuation from a uniform distribution, and the seller would like to incentivize buyers to invite…
Credit and liquidity risks represent main channels of financial contagion for interbank lending markets. On one hand, banks face potential losses whenever their counterparties are under distress and thus unable to fulfill their obligations.…
Electricity systems are experiencing increased effects of randomness and variability due to emerging stochastic assets. The increased effects introduce new uncertainties into power systems that can impact system operability and reliability.…
Regulatory stress tests have become one of the main tools for setting capital requirements at the largest U.S. banks. The Federal Reserve uses confidential models to evaluate bank-specific outcomes for bank-specific portfolios in shared…
This paper provides a framework for modeling the financial system with multiple illiquid assets when liquidation of illiquid assets is caused by failure to meet a leverage requirement. This extends the network model of Cifuentes, Shin &…
The observed powerlaw distributions of solar flare parameters can be interpreted in terms of a nonlinear dissipative system in the state of self-organized criticality (SOC). We present a universal analytical model of a SOC process that is…
Stylized facts can be regarded as constraints for any modeling attempt of price dynamics on a financial market, in that an empirically reasonable model has to reproduce these stylized facts at least qualitatively. The dynamics of market…
The aim of this paper is to quantify and manage systemic risk caused by default contagion in the interbank market. We model the market as a random directed network, where the vertices represent financial institutions and the weighted edges…
Why are human societies unstable? Theories based on the observation of recurring patterns in historical data indicate that economic inequality, as well as social factors are key drivers. So far, models of this phenomenon are more…
Financial markets are well known examples of multi-fractal complex systems that have garnered much interest in their characterization through complex network theory. The recent studies have used correlation based distance metrics for…
In this paper, we introduce an impact centrality measure to evaluate shock propagation on financial networks capturing a notion of contagion and systemic risk contributions, permitting comparisons of these risks over time. In addition, we…
The theory of complex networks and of disordered systems is used to study the stability and dynamical properties of a simple model of material flow networks defined on random graphs. In particular we address instabilities that are…
Wildfire propagation is a highly stochastic process where small changes in environmental conditions (such as wind speed and direction) can lead to large changes in observed behaviour. A traditional approach to quantify uncertainty in…
We develop a dynamic model of cascading failures in a financial network whereby cross-holdings are viewed as feedback, external assets investments as inputs and failure penalties as static nonlinearities. We provide sufficient milder and…