Related papers: Sharp Transitions and Systemic Risk in Sparse Fina…
The DebtRank algorithm has been increasingly investigated as a method to estimate the impact of shocks in financial networks, as it overcomes the limitations of the traditional default-cascade approaches. Here we formulate a dynamical…
We examine the heterogeneous responses of individual nodes in sparse networks to the random removal of a fraction of edges. Using the message-passing formulation of percolation, we discover considerable variation across the network in the…
We consider a financial network represented at any time instance by a random liability graph which evolves over time. The agents connect through credit instruments borrowed from each other or through direct lending, and these create the…
Common asset holdings are widely believed to have been the primary vector of contagion in the recent financial crisis. We develop a network approach to the amplification of financial contagion due to the combination of overlapping…
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…
In spite of the growing theoretical literature on cascades of failures in interbank lending networks, empirical results seem to suggest that networks of direct exposures are not the major channel of financial contagion. In this paper we…
We study the impact of contagion in a network of firms facing credit risk. We describe an intensity based model where the homogeneity assumption is broken by introducing a random environment that makes it possible to take into account the…
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…
We contribute to the understanding of how systemic risk arises in a network of credit-interlinked agents. Motivated by empirical studies we formulate a network model which, despite its simplicity, depicts the nature of interbank markets…
In several applications in distributed systems, an important design criterion is ensuring that the network is sparse, i.e., does not contain too many edges, while achieving reliable connectivity. Sparsity ensures communication overhead…
The contagion threshold for diffusion of innovations is defined and calculated in finite graphs (two-dimensional regular lattices, regular random networks (RRNs), and two kinds of scale-free networks (SFNs)) with and without the bilingual…
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…
We study the mean field approximation of a recent model of cascades on networks relevant to the investigation of systemic risk control in financial networks. In the model, the hypothesis of a trend reinforcement in the stochastic process…
Based on an empirical analysis of the network structure of the Austrian inter-bank market, we study the flow of funds through the banking network following exogenous shocks to the system. These shocks are implemented by stochastic changes…
We consider a large random network, in which the performance of a node depends upon that of its neighbours and some external random influence factors. This results in random vector valued fixed-point (FP) equations in large dimensional…
Understanding the subgraph distribution in random networks is important for modelling complex systems. In classic Erdos networks, which exhibit a Poissonian degree distribution, the number of appearances of a subgraph G with n nodes and g…
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…
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…
The importance of adequately modeling credit risk has once again been highlighted in the recent financial crisis. Defaults tend to cluster around times of economic stress due to poor macro-economic conditions, {\em but also} by directly…
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…