Related papers: Credit Freezes, Equilibrium Multiplicity, and Opti…
The dynamic network of relationships among corporations underlies cascading economic failures including the current economic crisis, and can be inferred from correlations in market value fluctuations. We analyze the time dependence of the…
Conventional models of matching markets assume that monetary transfers can clear markets by compensating for utility differentials. However, empirical patterns show that such transfers often fail to close structural preference gaps. This…
Evaluation of systemic risk in networks of financial institutions in general requires information of inter-institution financial exposures. In the framework of Debt Rank algorithm, we introduce an approximate method of systemic risk…
Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk…
The theory of multilayer networks is in its early stages, and its development provides vital methods for understanding complex systems. Multilayer networks, in their multiplex form, have been introduced within the last three years to…
In this paper we introduce a generalized extension of the Eisenberg-Noe model of financial contagion to allow for time dynamics of the interbank liabilities, including a dynamic examination of default risk. This framework separates the cash…
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 &…
In this paper we estimate the propagation of liquidity shocks through interbank markets when the information about the underlying credit network is incomplete. We show that techniques such as Maximum Entropy currently used to reconstruct…
Recent developments in the global liberalization of equity and currency markets, coupled to advances in trading technologies, are making markets increasingly interdependent. This increased fluidity raises questions about the stability of…
With the development of real-time networks such as reactive embedded systems, there is a need to compute deterministic performance bounds. This paper focuses on the performance guarantees and stability conditions in networks with cyclic…
We analyze the problem of scheduling in wireless networks to meet end-to-end service guarantees. Using network slicing to decouple the queueing dynamics between flows, we show that the network's ability to meet hard throughput and deadline…
The global financial system can be represented as a large complex network in which banks, hedge funds and other financial institutions are interconnected to each other through visible and invisible financial linkages. Recently, a lot of…
We study a model for cascade effects over finite networks based on a deterministic binary linear threshold model. Our starting point is a networked coordination game where each agent's payoff is the sum of the payoffs coming from pairwise…
We develop a structural default model for interconnected financial institutions in a probabilistic framework. For all possible network structures we characterize the joint default distribution of the system using Bayesian network…
We present a limits-to-arbitrage model to study the impact of securitization, leverage and credit risk protection on the cyclicity of bank credit. In a stable bank credit situation, no cycles of credit expansion or contraction appear.…
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…
The controllability of a network is a theoretical problem of relevance in a variety of contexts ranging from financial markets to the brain. Until now, network controllability has been characterized only on isolated networks, while the vast…
As financial institutions increasingly rely on machine learning models to automate lending decisions, concerns about algorithmic fairness have risen. This paper explores the tradeoff between enforcing fairness constraints (such as…
We study the problem of designing dynamic intervention policies for minimizing networked defaults in financial networks. Formally, we consider a dynamic version of the celebrated Eisenberg-Noe model of financial network liabilities and use…
Large but rare cascades triggered by small initial shocks are present in most of the infrastructure networks. Here we present a simple model for cascading failures based on the dynamical redistribution of the flow on the network. We show…