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Risk assessment is a substantial problem for financial institutions that has been extensively studied both for its methodological richness and its various practical applications. With the expansion of inclusive finance, recent attentions…
Measurement and management of credit concentration risk is critical for banks and relevant for micro-prudential requirements. While several methods exist for measuring credit concentration risk within institutions, the systemic effect of…
It was recently recognized that interdependencies among different networks can play a crucial role in triggering cascading failures and hence system-wide disasters. A recent model shows how pairs of interdependent networks can exhibit an…
Real-world complex systems always interact with each other, which causes these systems to collapse in an avalanche or cascading manner in the case of random failures or malicious attacks. The robustness of multilayer networks has attracted…
The emergence and evolution of real-world systems have been extensively studied in the last few years. However, equally important phenomena are related to the dynamics of systems' collapse, which has been less explored, especially when they…
The stability of the financial system is associated with systemic risk factors such as the concurrent default of numerous small obligors. Hence it is of utmost importance to study the mutual dependence of losses for different creditors in…
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…
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…
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 systemic default contagion in sparse financial networks and develop a framework for deciding when aggregate exposure matrices are reliable and when node-level network information changes tail risk and control design. The first…
We introduce a dynamic and stochastic interbank model with an endogenous notion of distress contagion, arising from rational worries about future defaults and ensuing losses. This entails a mark-to-market valuation adjustment for interbank…
We introduce a new family of network models, called hierarchical network models, that allow us to represent in an explicit manner the stochastic dependence among the dyads (random ties) of the network. In particular, each member of this…
The collapse of interdependent networks, as well as similar avalanche phenomena, is driven by cascading failures. At the critical point, the cascade begins as a critical branching process, where each failing node (element) triggers, on…
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…
Causal inference provides an analytical framework to identify and quantify cause-and-effect relationships among a network of interacting agents. This paper offers a novel framework for analyzing cascading failures in power transmission…
Interbank deposits (loans and credits) are quite common in banking system all over the world. Such interbank co-operation is profitable for banks but it can also lead to collective financial failures. In this paper we introduce a new model…
We derive a closed form solution for an optimal control problem related to an interbank lending schemes subject to terminal probability constraints on the failure of banks which are interconnected through a financial network. The derived…
We consider a model of contagion in financial networks recently introduced in the literature, and we characterize the effect of a few features empirically observed in real networks on the stability of the system. Notably, we consider the…
Systemic risk in banking systems remains a crucial issue that it has not been completely understood. In our toy model, banks are exposed to two sources of risks, namely, market risk from their investments in assets external to the banking…
Much research in systemic risk is focused on default contagion. While this demands an understanding of valuation, fewer articles specifically deal with the existence, the uniqueness, and the computation of equilibrium prices in structural…