Related papers: Understanding Financial Contagion: A Complexity Mo…
The European sovereign debt crisis has impaired many European banks. The distress on the European banks may transmit worldwide, and result in a large-scale knock-on default of financial institutions. This study presents a computer…
Current epidemics in the biological and social domains are challenging the standard assumptions of mathematical contagion models. Chief among them are the complex patterns of transmission caused by heterogeneous group sizes and infection…
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…
Machine learning models are increasingly used in a wide variety of financial settings. The difficulty of understanding the inner workings of these systems, combined with their wide applicability, has the potential to lead to significant new…
Using particle system methodologies we study the propagation of financial distress in a network of firms facing credit risk. We investigate the phenomenon of a credit crisis and quantify the losses that a bank may suffer in a large credit…
Management of systemic risk in financial markets is traditionally associated with setting (higher) capital requirements for market participants. There are indications that while equity ratios have been increased massively since the…
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…
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…
We consider a general tractable model for default contagion and systemic risk in a heterogeneous financial network, subject to an exogenous macroeconomic shock. We show that, under some regularity assumptions, the default cascade model…
This work explores the formation and propagation of systemic risks across traditional finance (TradFi) and decentralized finance (DeFi), offering a comparative framework that bridges these two increasingly interconnected ecosystems. We…
The classical reduced-form and filtration expansion framework in credit risk is extended to the case of multiple, non-ordered defaults, assuming that conditional densities of the default times exist. Intensities and pricing formulas are…
The world of network science is fascinating and filled with complex phenomena that we aspire to understand. One of them is the dynamics of spreading processes over complex networked structures. Building the knowledge-base in the field where…
In classical contagion models, default systems are Markovian conditionally on the observation of their stochastic environment, with interacting intensities. This necessitates that the environment evolves autonomously and is not influenced…
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…
Contagion processes, representing the spread of infectious diseases, information, or social behaviors, are often schematized as taking place on networks, which encode for instance the interactions between individuals. The impact of the…
The study of networks plays a crucial role in investigating the structure, dynamics, and function of a wide variety of complex systems in myriad disciplines. Despite the success of traditional network analysis, standard networks provide a…
We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump--diffusion process for the risk factors, i.e. for the company assets. We also include correlations…
Investigation of the critical levels and catastrophes in the complex systems of different nature is useful and perspective. Mathematical modeling and analysis is presented for revealing and investigation of the phenomena and critical levels…
The standard assumptions that underlie many conceptual and quantitative frameworks do not hold for many complex physical, biological, and social systems. Complex systems science clarifies when and why such assumptions fail and provides…
The present paper provides a multi-period contagion model in the credit risk field. Our model is an extension of Davis and Lo's infectious default model. We consider an economy of n firms which may default directly or may be infected by…