Related papers: Sharp Transitions and Systemic Risk in Sparse Fina…
This paper develops a continuous functional framework for analyzing contagion dynamics in financial networks, extending the Navier-Stokes-based approach to network-structured spatial processes. We model financial distress propagation as a…
It had been believed in the conventional practice that the risk of a bank going bankrupt is lessened in a straightforward manner by transferring the risk of loan defaults. But the failure of American International Group in 2008 posed a more…
The interconnectedness of financial institutions affects instability and credit crises. To quantify systemic risk we introduce here the PD model, a dynamic model that combines credit risk techniques with a contagion mechanism on the network…
The 2023 U.S. banking crisis propagated not through direct financial linkages but through a high-frequency, information-based contagion channel. This paper moves beyond exploration analysis to test the "too-similar-to-fail" hypothesis,…
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…
External or internal shocks may lead to the collapse of a system consisting of many agents. If the shock hits only one agent initially and causes it to fail, this can induce a cascade of failures among neighoring agents. Several critical…
This study extends the Gai-Kapadia framework, originally developed for interbank contagion, to assess systemic risk and default cascades in global equity markets. We analyze a 30 asset network comprising Brazilian and developed market…
We study an inhomogeneous sparse random graph on [N] = {1, . . . , N } as introduced in a seminal paper by Bollobas, Janson and Riordan (2007): vertices have a type (here in a compact metric space S), and edges between different vertices…
We consider a network of bank holdings, where every holding has two subsidiaries of different types. A subsidiary can trade with another holding's subsidiary of the same type. Holdings support their subsidiaries up to a certain level when…
This paper explores the estimation of a panel data model with cross-sectional interaction that is flexible both in its approach to specifying the network of connections between cross-sectional units, and in controlling for unobserved…
This paper studies the propagation connectivity of a random hypergraph $\mathbb{G}$ containing both 2-edges and 3-hyperedges. We find an exact threshold of the propagation connectivity of $\mathbb{G}$: If $I_{\epsilon,r}<-1$, then…
The study of systemic risk is often presented through the analysis of several measures referring to quantities used by practitioners and policy makers. Almost invariably, those measures evaluate the size of the impact that exogenous events…
We develop a model for contagion in reinsurance networks by which primary insurers' losses are spread through the network. Our model handles general reinsurance contracts, such as typical excess of loss contracts. We show that simpler…
The failure of key financial institutions may accelerate risk contagion due to their interconnections within the system. In this paper, we propose a robust portfolio strategy to mitigate systemic risks during extreme events. We use the…
The threshold model is a simple but classic model of contagion spreading in complex social systems. To capture the complex nature of social influencing we investigate numerically and analytically the transition in the behavior of…
We consider random networks whose dynamics is described by a rate equation, with transition rates $w_{nm}$ that form a symmetric matrix. The long time evolution of the system is characterized by a diffusion coefficient $D$. In one dimension…
Adding edges between layers of interconnected networks is an important way to optimize the spreading dynamics. While previous studies mostly focus on the case of adding a single edge, the theoretical optimal strategy for adding multiple…
This paper introduces a formulation of the optimal network compression problem for financial systems. This general formulation is presented for different levels of network compression or rerouting allowed from the initial interbank network.…
Tolerance against failures and errors is an important feature of many complex networked systems [1,2]. It has been shown that a class of inhomogeneously wired networks called scale-free[1,3] networks can be surprisingly robust to failures,…
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…