Related papers: Hierarchical contagions in the interdependent fina…
In this work, we propose an interdependent, multilayer network model and percolation process that matches infrastructures better than previous models by allowing some nodes to survive when their interdependent neighbors fail. We consider a…
We consider a network of bank holdings, where every holding has two subsidiaries of different types. A subsidiary can trade with another holding's subsidiary of the same type. Holdings support their subsidiaries up to a certain level when…
We consider a general tractable model for default contagion and systemic risk in a heterogeneous financial network, subject to an exogenous macroeconomic shock. We show that, under some regularity assumptions, the default cascade model…
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…
The failure of key financial institutions may accelerate risk contagion due to their interconnections within the system. In this paper, we propose a robust portfolio strategy to mitigate systemic risks during extreme events. We use the…
Physical infrastructure systems supply crucial resources to residential, commercial, and industrial activities. These infrastructure systems generally consist of multiple types of infrastructure assets that are interdependent. In the event…
Financial contagion from liquidity shocks has being recently ascribed as a prominent driver of systemic risk in interbank lending markets. Building on standard compartment models used in epidemics, in this work we develop an EDB…
Integrated cyber-physical systems (CPSs), such as the smart grid, are increasingly becoming the underpinning technology for major industries. A major concern regarding such systems are the seemingly unexpected large-scale failures, which…
This paper investigates two mechanisms of financial contagion that are, firstly, the correlated exposure of banks to the same source of risk, and secondly the direct exposure of banks in the interbank market. It will consider a random…
Complex systems are challenging to control because the system responds to the controller in a nonlinear fashion, often incorporating feedback mechanisms. Interdependence of systems poses additional difficulties, as cross-system connections…
The seniority of debt, which determines the order in which a bankrupt institution repays its debts, is an important and sometimes contentious feature of financial crises, yet its impact on system-wide stability is not well understood. We…
Interconnected networks describe the dynamics of important systems in a wide range such as biological systems and electrical power grids. Some important features of these systems were successfully studied and understood through simplified…
We consider a dynamical model of distress propagation on complex networks, which we apply to the study of financial contagion in networks of banks connected to each other by direct exposures. The model that we consider is an extension of…
Modern networks are becoming increasingly interdependent. As a prominent example, the smart grid is an electrical grid controlled through a communications network, which in turn is powered by the electrical grid. Such interdependencies…
We consider a structural default model in an interconnected banking network as in Lipton [International Journal of Theoretical and Applied Finance, 19(6), 2016], with mutual obligations between each pair of banks. We analyse the model…
Recently, there has been a growing interest in network research, especially in these fields of biology, computer science, and sociology. It is natural to address complex financial issues such as the European sovereign debt crisis from the…
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 financial risk refers to the simultaneous failure or destabilization of multiple financial institutions, often triggered by contagion mechanisms or common exposures to shocks. In this paper, we present a dynamical model of bank…
We use bank-level balance sheet data from 2005 to 2010 to study interactions within the banking system of five emerging countries: Argentina, Brazil, Mexico, South Africa, and Taiwan. For each country we construct a financial network based…
In today's global economy, supply chain (SC) entities have become increasingly interconnected with demand and supply relationships due to the need for strategic outsourcing. Such interdependence among firms not only increases efficiency but…