Related papers: Credit Freezes, Equilibrium Multiplicity, and Opti…
This paper provides a framework for modeling the financial system with multiple illiquid assets during a crisis. This work generalizes the paper by Amini, Filipovic and Minca (2016) by allowing for differing liquidation strategies. The main…
During a financial crisis, the capital markets network frequently exhibits a high correlation between returns. We developed a network analysis framework based on daily returns from 42 countries to determine systemic stability. Our network…
Rapid growth of large loads led by data centers is straining grid capacity. These loads increasingly accept curtailment risk through non-firm interconnection agreements to gain faster grid access, expanding the pool of consumers subject to…
This paper considers an optimal control of a big financial company with debt liability under bankrupt probability constraints. The company, which faces constant liability payments and has choices to choose various production/business…
Many man-made networks support each other to provide efficient services and resources to the customers, despite that this support produces a strong interdependency between the individual networks. Thus an initial failure of a fraction $1-p$…
In our model, private actors with interbank cash flows similar to, but nore general than (Carmona, Fouque, Sun, 2013) borrow from the outside economy at a certain interest rate, controlled by the central bank, and invest in risky assets.…
The 2008 financial crisis illustrated the need for a thorough, functional understanding of systemic risk in strongly interconnected financial structures. Dynamic processes on complex networks being intrinsically difficult, most recent…
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…
A debt swap is an elementary edge swap in a directed, weighted graph, where two edges with the same weight swap their targets. Debt swaps are a natural and appealing operation in financial networks, in which nodes are banks and edges…
In the context of containment of default contagion in financial networks, we here study a regulator that allocates pre-shock capital or liquidity buffers across banks connected by interbank liabilities and common external asset exposures.…
The interbank market is considered one of the most important channels of contagion. Its network representation, where banks and claims/obligations are represented by nodes and links (respectively), has received a lot of attention in the…
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…
The European sovereign debt crisis has impaired many European banks. The distress on the European banks may transmit worldwide, and result in a large-scale knock-on default of financial institutions. This study presents a computer…
We analyze the stability of financial investment networks, where financial institutions hold overlapping portfolios of assets. We consider the effect of portfolio diversification and heterogeneous investments using a random matrix dynamical…
Markovian network equilibrium generalizes the classical Wardrop equilibrium in network games. At a Markovian network equilibrium, each player of the game solves a Markov decision process instead of a shortest path problem. We propose two…
Many complex systems demand manifold resources to be supplied from distinct channels to function properly, i.e, water, gas, and electricity for a city. Here, we study a model for viability of such systems demanding more than one type of…
In a previous paper, we applied a field formalism to analyze capital allocation and accumulation within a microeconomic framework of investors and firms. The financial connections were modeled by a field of stakes, representing the links…
We present an empirical analysis of the microstructure of financial markets and, in particular, of the static and dynamic properties of liquidity. We find that on relatively large time scales (15 minutes) large price fluctuations are…
We present a simple continuous-time model of clearing in financial networks. Financial firms are represented as "tanks" filled with fluid (money), flowing in and out. Once "pipes" connecting "tanks" are open, the system reaches the clearing…
Recurring international financial crises have adverse socioeconomic effects and demand novel regulatory instruments or strategies for risk management and market stabilization. However, the complex web of market interactions often impedes…