Related papers: Unveiling Early Warning Signals of Systemic Risks …
Financial markets of emerging economies are vulnerable to extreme and cascading information spillovers, surges, sudden stops and reversals. With this in mind, we develop a new online early warning system (EWS) to detect what is referred to…
In this topical review, we present a brief overview of the different methods and measures to detect the occurrence of critical transitions in complex systems. We start by introducing the mechanisms that trigger critical transitions, and how…
Financial crises emerge when structural vulnerabilities accumulate across sectors, markets, and investor behavior. Predicting these systemic transitions is challenging because they arise from evolving interactions between market…
Social ecological systems are often difficult to investigate and manage because of their inherent complexity1. Small variations in external drivers can lead to abrupt changes associated with instabilities and bifurcations in the underlying…
Early warning systems (EWSs) are critical for forecasting and preventing economic and financial crises. EWSs are designed to provide early warning signs of financial troubles, allowing policymakers and market participants to intervene…
This study constructs an integrated early warning system (EWS) that identifies and predicts stock market turbulence. Based on switching ARCH (SWARCH) filtering probabilities of the high volatility regime, the proposed EWS first classifies…
Complex non-linear interactions between banks and assets we model by two time-dependent Erd\H{o}s Renyi network models where each node, representing bank, can invest either to a single asset (model I) or multiple assets (model II). We use…
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…
The financial crisis clearly illustrated the importance of characterizing the level of 'systemic' risk associated with an entire credit network, rather than with single institutions. However, the interplay between financial distress and…
In the wake of the SARS-CoV-2 pandemic, there has been heightened interest from applied mathematicians in infectious disease modelling. Modelling efforts often focus on predicting whether diseases are likely to be eliminated or, instead,…
The growing instability of both global and domestic economic environments has increased the risk of financial distress at the household level. However, traditional econometric models often rely on delayed and aggregated data, limiting their…
This work proposes an augmented variant of DebtRank with uncertainty intervals as a method to investigate and assess systemic risk in financial networks, in a context of incomplete data. The algorithm is tested against a default contagion…
We study the difference between the level of systemic risk that is empirically measured on an interbank network and the risk that can be deduced from the balance sheets composition of the participating banks. Using generalised DebtRank…
This paper introduces a novel framework to study default dependence and systemic risk in a financial network that evolves over time. We analyse several indicators of risk, and develop a new latent space model to assess the health of key…
Successfully anticipating sudden major changes in complex systems is a practical concern. Such complex systems often form a heterogeneous network, which may show multistage transitions in which some nodes experience a regime shift earlier…
A financial system contains many elements networked by their relationships. Extensive works show that topological structure of the network stores rich information on evolutionary behaviors of the system such as early warning signals of…
Market instability has been extensively studied using mathematical approaches to characterize complex trading dynamics and detect structural change points. This study explores the potential for early warning of market instability by…
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…
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…
Banking system crises are complex events that in a short span of time can inflict extensive damage to banks themselves and to the external economy. The crisis literature has so far identified a number of distinct effects or channels that…