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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…
Typically, contagion strength is modeled by a transmission rate $\lambda$, whereby all nodes in a network are treated uniformly in a mean-field approximation. However, local agents react differently to the same contagion based on their…
Although suppressing the spread of a disease is usually achieved by investing in public resources, in the real world only a small percentage of the population have access to government assistance when there is an outbreak, and most must…
Assessing the stability of economic systems is a fundamental research focus in economics, that has become increasingly interdisciplinary in the currently troubled economic situation. In particular, much attention has been devoted to the…
The financial crisis has dramatically demonstrated that the traditional approach to apply univariate monetary risk measures to single institutions does not capture sufficiently the perilous systemic risk that is generated by the…
Companies do not operate in a vacuum. As companies move towards an increasingly specialized production function and their reach is becoming truly global, their aptitude in managing and shaping their inter-organizational network is a…
The dynamics of network social contagion processes such as opinion formation and epidemic spreading are often mediated by interactions between multiple nodes. Previous results have shown that these higher-order interactions can profoundly…
An epidemic spreading in a network calls for a decision on the part of the network members: They should decide whether to protect themselves or not. Their decision depends on the trade-off between their perceived risk of being infected and…
We analyze how interdependencies between organizations in financial networks can lead to multiple possible equilibrium outcomes. A multiplicity arises if and only if there exists a certain type of dependency cycle in the network that allows…
Models of threshold driven contagion explain the cascading spread of information, behavior, systemic risk, and epidemics on social, financial and biological networks. At odds with empirical observation, these models predict that…
We study insolvency cascades in an interbank system when banks are allowed to insure their loans with credit default swaps (CDS) sold by other banks. We show that, by properly shifting financial exposures from one institution to another, a…
Adhesion interactions mediated by multiple bond types are relevant for many biological and soft matter systems, including the adhesion of biological cells and functionalized colloidal particles to various substrates. To elucidate advantages…
Following the financial crisis of 2007-2008, a deep analogy between the origins of instability in financial systems and complex ecosystems has been pointed out: in both cases, topological features of network structures influence how easily…
Modelling of contagion in interbank networks is discussed. A model taking into account bow-tie structure and dissasortativity of interbank networks is developed. The model is shown to provide a good quantitative description of the Russian…
We introduce a family of risk networks composed from a) several subsidiary branches $U_i(t), i=1,...,I$ necessary for coping with different types of risks, which must all be kept above $0$, and b) a central branch (CB) which bails out the…
Network theory proved recently to be useful in the quantification of many properties of financial systems. The analysis of the structure of investment portfolios is a major application since their eventual correlation and overlap impact the…
We model the production of complex goods in a large supply network. Each firm sources several essential inputs through relationships with other firms. Individual supply relationships are at risk of idiosyncratic failure, which threatens to…
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 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…
Multi-stability is a widely observed phenomenon in real complex networked systems, such as technological infrastructures, ecological systems, gene regulation, transportation and more. When a system functions normally but there exists also a…