Ramadiah, A;
Di Gangi, D;
Ruggiero Lo Sardo, D;
Macchiati, V;
Minh, TP;
Pinotti, F;
Wilinski, M;
... Cimini, G; + view all
(2019)
Network sensitivity of systemic risk.
Journal of Network Theory in Finance
, 5
(3)
pp. 53-72.
10.21314/JNTF.2019.056.
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Abstract
A growing body of studies on systemic risk in financial markets has emphasized the key importance of taking into consideration the complex interconnections among financial institutions. Much effort has been put into modeling the contagion dynamics of financial shocks and into assessing the resilience of specific financial markets, either using real network data, reconstruction techniques or simple toy networks. Here, we address the more general problem of how shock propagation dynamics depend on the topological details of the underlying network. To this end, we consider different realistic network topologies, all consistent with balance sheet information obtained from real data on financial institutions. In particular, we consider networks of varying density and with different block structures. In addition, we diversify in the details of the shock propagation dynamics. We confirm that the systemic risk properties of a financial network are extremely sensitive to its network features. Our results can aid in the design of regulatory policies to improve the robustness of financial markets.
| Type: | Article |
|---|---|
| Title: | Network sensitivity of systemic risk |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.21314/JNTF.2019.056 |
| Publisher version: | https://doi.org/10.21314/JNTF.2019.056 |
| Language: | English |
| Additional information: | This version is the version of record. For information on re-use, please refer to the publisher's terms and conditions. |
| Keywords: | financial networks; systemic risk and contagion; DebtRank; network reconstruction; mesoscale structure |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > Dept of Computer Science |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10119667 |
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