Related papers: Control of Dynamic Financial Networks (The Extende…
This paper studies an optimal investment and risk control problem for an insurer with default contagion and regime-switching. The insurer in our model allocates his/her wealth across multi-name defaultable stocks and a riskless bond under…
We undertake a fundamental study of network equilibria modeled as solutions of fixed point equations for monotone linear functions with saturation nonlinearities. The considered model extends one originally proposed to study systemic risk…
Complex networks with heterogeneous distribution of loads may undergo a global cascade of overload failures when highly loaded nodes or edges are removed due to attacks or failures. Since a small attack or failure has the potential to…
A characteristic property of networks is their ability to propagate influences, such as infectious diseases, behavioral changes, and failures. An especially important class of such contagious dynamics is that of cascading processes. These…
Many new models for measuring financial contagion have been presented recently. While these models have not been specified for investment funds directly, there are many similarities that could be explored to extend the models. In this work…
We analyse the importance of international relations between countries on the financial stability. The contagion effect in the network is tested by implementing an epidemiological model, comprising a number of European countries and using…
A probabilistic framework is introduced that represents stylized banking networks and aims to predict the size of contagion events. In contrast to previous work on random financial networks, which assumes independent connections between…
We consider the problem faced by a central bank which bails out distressed financial institutions that pose systemic risk to the banking sector. In a structural default model with mutual obligations, the central agent seeks to inject a…
A novel network-based approach is introduced to analyze banking systems, focusing on two main themes: identifying influential nodes within global banking networks using Bank for International Settlements data and developing an algorithm to…
We consider the problem of governing systemic risk in an assets-liabilities dynamical model of banking system. In the model considered each bank is represented by its assets and its liabilities.The capital reserves of a bank are the…
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…
Micro-structural models of contagion and systemic risk emphasize that shock propagation is inherently multi-channel, spanning counterparty exposures, short-term funding and roll-over risk, securities cross-holdings, and common-asset…
The weighted and directed network of countries based on the number of overseas banks is analyzed in terms of its fragility to the banking crisis of one country. We use two different models to describe transmission of shocks, one local and…
In this paper, a nonlinear system aiming at reducing the signal transmission rate in a networked control system is constructed by adding nonlinear constraints to a linear feedback control system. Its stability is investigated in detail. It…
The steadily high demand for cash contributes to the expansion of the network of Bank payment terminals. To optimize the amount of cash in payment terminals, it is necessary to minimize the cost of servicing them and ensure that there are…
Financial network games model payment incentives in the context of networked liabilities. In this paper, we advance the understanding of incentives in financial networks in two important directions: minimal clearing (arising, e.g., as a…
A control scheme to reduce the size of avalanches of the Bak-Tang-Wiesenfeld model on complex networks is proposed. Three network types are considered: those proposed by Erd\H{o}s-Renyi, Goh-Kahng-Kim, and a real network representing the…
We derive the default cascade model and the fire-sale spillover model in a unified interdependent framework. The interactions among banks include not only direct cross-holding, but also indirect dependency by holding mutual assets outside…
We study contagion and systemic risk in sparse financial networks with balance-sheet interactions on a directed random graph. Each institution has homogeneous liabilities and equity, and exposures along outgoing edges are split equally…
Credit and liquidity risks represent main channels of financial contagion for interbank lending markets. On one hand, banks face potential losses whenever their counterparties are under distress and thus unable to fulfill their obligations.…