Related papers: Hierarchical contagions in the interdependent fina…
We develop a unified model in which AI adoption in financial markets generates systemic risk through three mutually reinforcing channels: performative prediction, algorithmic herding, and cognitive dependency. Within an extended rational…
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…
In a network, a local disturbance can propagate and eventually cause a substantial part of the system to fail, in cascade events that are easy to conceptualize but extraordinarily difficult to predict. Here, we develop a statistical…
Large cascades are a common occurrence in many natural and engineered complex systems. In this paper we explore the propagation of cascades across networks using realistic network topologies, such as heterogeneous degree distributions, as…
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…
A financial system contains many elements networked by their relationships. Extensive works show that topological structure of the network stores rich information on evolutionary behaviors of the system such as early warning signals of…
A macroeconomic model based on the economic variables (i) assets, (ii) leverage (defined as debt over asset) and (iii) trust (defined as the maximum sustainable leverage) is proposed to investigate the role of credit in the dynamics of…
The 2023 U.S. banking crisis propagated not through direct financial linkages but through a high-frequency, information-based contagion channel. This paper moves beyond exploration analysis to test the "too-similar-to-fail" hypothesis,…
Whereas traditional credit scoring tends to employ only individual borrower- or loan-level predictors, it has been acknowledged for some time that connections between borrowers may result in default risk propagating over a network. In this…
The vulnerability of an isolated network to cascades is fundamentally affected by its interactions with other networks. Motivated by failures cascading among electrical grids, we study the Bak-Tang-Wiesenfeld sandpile model on two…
In the context of epidemic spreading, many intricate dynamical patterns can emerge due to the cooperation of different types of pathogens or the interaction between the disease spread and other failure propagation mechanism. To unravel such…
In the aftermath of the financial crisis, the growing literature on financial networks has widely documented the predictive power of topological characteristics (e.g. degree centrality measures) to explain the systemic impact or systemic…
We present an analytical model to study the role of expectation feedbacks and overlapping portfolios on systemic stability of financial systems. Building on [Corsi et al., 2016], we model a set of financial institutions having Value at Risk…
The threshold model has been widely adopted as a classic model for studying contagion processes on social networks. We consider asymmetric individual interactions in social networks and introduce a persuasion mechanism into the threshold…
In normal times, it is assumed that financial institutions operating in non-overlapping sectors have complementary and distinct outcomes, typically reflected in mostly uncorrelated outcomes and asset returns. Such is the reasoning behind…
In classical contagion models, default systems are Markovian conditionally on the observation of their stochastic environment, with interacting intensities. This necessitates that the environment evolves autonomously and is not influenced…
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…
We report on time-varying network connectedness within three banking systems: North America, the EU, and ASEAN. The original method by Diebold and Yilmaz is improved by using exponentially weighted daily returns and ridge regularization on…
The present paper provides a multi-period contagion model in the credit risk field. Our model is an extension of Davis and Lo's infectious default model. We consider an economy of n firms which may default directly or may be infected by…
From critical infrastructure, to physiology and the human brain, complex systems rarely occur in isolation. Instead, the functioning of nodes in one system often promotes or suppresses the functioning of nodes in another. Despite advances…