Related papers: Cascading Failures in the Global Financial System:…
Cascading failure is a potentially devastating process that spreads on real-world complex networks and can impact the integrity of wide-ranging infrastructures, natural systems, and societal cohesiveness. One of the essential features that…
We develop a dynamic model of cascading failures in a financial network whereby cross-holdings are viewed as feedback, external assets investments as inputs and failure penalties as static nonlinearities. We provide sufficient milder and…
Global catastrophic risk events, such as nuclear war, pose a severe threat to the stability of international financial systems. As evidenced by even less severe scenarios like the Great Recession, an economic failure can propagate through…
As economic entities become increasingly interconnected, a shock in a financial network can provoke significant cascading failures throughout the system. To study the systemic risk of financial systems, we create a bi-partite banking…
Cascading failures, such as bankruptcies and defaults, pose a serious threat for the resilience of the global financial system. Indeed, because of the complex investment and cross-holding relations within the system, failures can occur as a…
The recent financial crisis have generated renewed interests in fragilities of global financial networks among economists and regulatory authorities. In particular, a potential vulnerability of the financial networks is the "financial…
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…
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 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…
The current global financial system forms a highly interconnected network where a default in one of its nodes can propagate to many other nodes, causing a catastrophic avalanche effect. In this paper we consider the problem of reducing the…
Propagation of balance-sheet or cash-flow insolvency across financial institutions may be modeled as a cascade process on a network representing their mutual exposures. We derive rigorous asymptotic results for the magnitude of contagion in…
One of the most defining features of the global financial network is its inherent complex and intertwined structure. From the perspective of systemic risk it is important to understand the influence of this network structure on default…
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…
The recent financial crisis of 2008 and the 2011 indebtedness of Greece highlight the importance of understanding the structure of the global financial network. In this paper we set out to analyze and characterize this network, as captured…
We analyze cascades of defaults in an interbank loan market. The novel feature of this study is that the network structure and the size distribution of banks are derived from empirical data. We find that the ability of a defaulted…
As impressively shown by the financial crisis in 2007/08, contagion effects in financial networks harbor a great threat for the stability of the entire system. Without sufficient capital requirements for banks and other financial…
Various social, financial, biological and technological systems can be modeled by interdependent networks. It has been assumed that in order to remain functional, nodes in one network must receive the support from nodes belonging to…
The dynamic network of relationships among corporations underlies cascading economic failures including the current economic crisis, and can be inferred from correlations in market value fluctuations. We analyze the time dependence of the…
The fragility of financial systems was starkly demonstrated in early 2023 through a cascade of major bank failures in the United States, including the second, third, and fourth largest collapses in the US history. The highly interdependent…
Risks threatening modern societies form an intricately interconnected network that often underlies crisis situations. Yet, little is known about how risk materializations in distinct domains influence each other. Here we present an approach…