Related papers: Systemic Risk in Financial Networks: A Survey
We propose a dynamic model of dependence structure between financial institutions within a financial system and we construct measures for dependence and financial instability. Employing Markov structures of joint credit migrations, our…
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…
In this study, we propose a new multi-objective portfolio optimization with idiosyncratic and systemic risks for financial networks. The two risks are measured by the idiosyncratic variance and the network clustering coefficient derived…
Financial markets are exposed to systemic risk (SR), the risk that a major fraction of the system ceases to function, and collapses. It has recently become possible to quantify SR in terms of underlying financial networks where nodes…
We present a network-based framework for simulating systemic risk that considers shock propagation in banking systems. In particular, the framework allows the modeller to reflect a top-down framework where a shock to one bank in the system…
Systemic liquidity risk, defined by the IMF as "the risk of simultaneous liquidity difficulties at multiple financial institutions", is a key topic in macroprudential policy and financial stress analysis. Specialized models to simulate…
Systemic risk refers to the overall vulnerability arising from the high degree of interconnectedness and interdependence within the financial system. In the rapidly developing decentralized finance (DeFi) ecosystem, numerous studies have…
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…
We address a fundamental problem that is systematically encountered when modeling complex systems: the limitedness of the information available. In the case of economic and financial networks, privacy issues severely limit the information…
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…
We consider the problem of governing systemic risk in a banking system model. The banking system model consists in an initial value problem for a system of stochastic differential equations whose dependent variables are the log-monetary…
In this paper we analyze the resilience of a network of banks to joint price fluctuations of the external assets in which they have shared exposures, and evaluate the worst-case effects of the possible default contagion. Indeed, when the…
This paper studies systemic-risk connectedness in the European insurance sector at three levels of granularity: across major segments of financial markets, across insurance subsectors, and across individual insurance companies. Using a…
We study financial networks where banks are connected by debt contracts. We consider the operation of debt swapping when two creditor banks decide to exchange an incoming payment obligation, thus leading to a locally different network…
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…
The instability of the financial system as experienced in recent years and in previous periods is often linked to credit defaults, i.e., to the failure of obligors to make promised payments. Given the large number of credit contracts, this…
The fragility of financial systems was starkly demonstrated in early 2023 through a cascade of major bank failures in the United States, including the second, third, and fourth largest collapses in the US history. The highly interdependent…
The recent financial crisis have generated renewed interests in fragilities of global financial networks among economists and regulatory authorities. In particular, a potential vulnerability of the financial networks is the "financial…
We model a network economy with three sectors: downstream firms, upstream firms, and banks. Agents are linked by productive and credit relationships so that the behavior of one agent influences the behavior of the others through network…
This work proposes an augmented variant of DebtRank with uncertainty intervals as a method to investigate and assess systemic risk in financial networks, in a context of incomplete data. The algorithm is tested against a default contagion…