Related papers: Systemic risk in interbank networks: disentangling…
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 inability to see and quantify systemic financial risk comes at an immense social cost. Systemic risk in the financial system arises to a large extent as a consequence of the interconnectedness of its institutions, which are linked…
The global financial crisis in 2007-2009 demonstrated that systemic risk can spread all over the world through a complex web of financial linkages, yet we still lack fundamental knowledge about the evolution of the financial web. In…
Bank crisis is challenging to define but can be manifested through bank contagion. This study presents a comprehensive framework grounded in nonlinear time series analysis to identify potential early warning signals (EWS) for impending…
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…
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…
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 negative externalities from an individual bank failure to the whole system can be huge. One of the key purposes of bank regulation is to internalize the social costs of potential bank failures via capital charges. This study proposes a…
The level of systemic risk in economic and financial systems is strongly determined by the structure of the underlying networks of interdependent entities that can propagate shocks and stresses. Since changes in network structure imply…
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…
A simple banking network model is proposed which features multiple waves of bank defaults and is analytically solvable in the limiting case of an infinitely large homogeneous network. The model is a collection of nodes representing…
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…
We provide a framework for detecting relevant insurance companies in a systemic risk perspective. Among the alternative methodologies for measuring systemic risk, we propose a complex network approach where insurers are linked to form a…
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…
The latest financial crisis has painfully revealed the dangers arising from a globally interconnected financial system. Conventional approaches based on the notion of the existence of equilibrium and those which rely on statistical…
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…
In this paper we consider a mean-field model of interacting diffusions for the monetary reserves in which the reserves are subjected to a self- and cross-exciting shock. This is motivated by the financial acceleration and fire sales…
The scope of financial systemic risk research encompasses a wide range of interbank channels and effects, including asset correlation shocks, default contagion, illiquidity contagion, and asset fire sales. This paper introduces a financial…
The global balance index is used in the network literature to quantify how balanced a signed network is. In this paper we show that the global balance index of financial correlation networks can be used as a systemic risk measure. We define…
The aim of this paper is to quantify and manage systemic risk caused by default contagion in the interbank market. We model the market as a random directed network, where the vertices represent financial institutions and the weighted edges…