Related papers: Budgeted Robust Intervention Design for Financial …

In the last years, increasing efforts have been put into the development of effective stress tests to quantify the resilience of financial institutions. Here we propose a stress test methodology for central counterparties based on a network…

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…

In economic settings such as learning, social behavior, and financial contagion, agents interact through interdependent networks. This paper examines how a decision maker (DM) can design an optimal intervention strategy under network…

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…

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…

Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk…

Micro-structural models of contagion and systemic risk emphasize that shock propagation is inherently multi-channel, spanning counterparty exposures, short-term funding and roll-over risk, securities cross-holdings, and common-asset…

The question of how to stabilize financial systems has attracted considerable attention since the global financial crisis of 2007-2009. Recently, Beale et al. ("Individual versus systemic risk and the regulator's dilemma", Proc Natl Acad…

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 paper considers an insurer with two collaborating business lines that faces three critical decisions: (1) dividend payout, (2) reinsurance coverage, and (3) capital injection between the lines, in the presence of model uncertainty. 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…

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…

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.…

We study the disequilibrium dynamics of a stylised model of production networks in which firms use perishable and non-substitutable intermediate inputs, so that adverse idiosyncratic productivity shocks can trigger downstream shortages and…

Default risk calculus plays a crucial role in portfolio optimization when the risky asset is under threat of bankruptcy. However, traditional stochastic control techniques are not applicable in this scenario, and additional assumptions are…

This paper develops a quantitative framework to assess the robustness of Bayes-optimal decisions in finite decision problems under model uncertainty. We introduce two complementary stability notions for acts: the robustness radius,…

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…

Assessing the stability of economic systems is a fundamental research focus in economics, that has become increasingly interdisciplinary in the currently troubled economic situation. In particular, much attention has been devoted to the…

The Survivable Network Design problem (SNDP) is a well-studied problem, motivated by the design of networks that are robust to faults under the assumption that any subset of edges up to a specific number can fail. We consider non-uniform…

This study presents an ANWSER model (asset network systemic risk model) to quantify the risk of financial contagion which manifests itself in a financial crisis. The transmission of financial distress is governed by a heterogeneous bank…