This paper examines how the U.S.--China trade war affects stock markets, finding evidence of financial contagion and changes in risk channels.
problem The impact of the U.S.--China trade war on stock markets and financial contagion.
method Developed a novel jump-diffusion process to account for risk contagion, using high-frequency financial data and quasi-maximum likelihood estimator.
result Evidence of financial contagion from the U.S. to China, with changes in risk contagion channels.
Modeling bank panics and financial crises with contagion channels.
problem Understanding and predicting financial crises and contagion effects.
method Develops a comprehensive model for systemic risk that includes stock-flow consistency and Asset-Liability symmetry.
result Identifies and models the dangerous spillover effects that dominate future financial crises.
Multiplex Network Hawkes model for systemic risk measurement
problem Investigate how contagion in financial networks is affected by different transmission channels
method Multiplex Network Hawkes model
result Sparse contagion pathways, with systemic-risk transmission concentrated in outward flows from a small number of influential institutions
This thesis models financial contagion and stability, providing insights for systemic risk management.
problem Systemic risk in financial networks through default contagion and fire sales.
method Developed mathematical models for default contagion in weighted financial networks, derived asymptotic expressions for total damage.
result Explicit asymptotic expressions for total damage and stability criteria for financial systems.
Complex contagion model explains financial fire sales through continuous asset prices.
problem Modeling financial fire sales with a continuum of asset prices.
method Developed a threshold model of continuous-state cascades using real values for asset prices.
result Discretization approach accurately replicates the distribution of defaulted banks and asset prices.
This study quantifies systemic risk from overlapping portfolios in the Mexican financial system.
problem Systemic risk from indirect interconnections between financial institutions.
method Represented the Mexican financial system as a bipartite network of securities and financial institutions; quantified systemic risk from overlapping portfolios.
result Total systemic risk levels underestimated by up to 50% when only direct exposures are considered.
Bayesian networks model financial contagion in interconnected institutions.
problem Understanding and predicting contagion in financial networks.
method Structural default model using Bayesian network methodologies.
result Bayesian networks can detect contagion channels and measure systemic importance.
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 show that networks of interbank exposures can however significantly amplify contagi…
Model assesses how supply chain disruptions affect financial stability.
problem Systemic risk in production networks and its financial implications.
method Data-driven econo-financial stress-testing framework combining supply chain and interbank networks.
result Increase of up to 28% in financial systemic risk due to production network contagion.
The paper models systemic risk in European and U.S. banks using factor copulas.
problem Modeling the joint and conditional distress probabilities of banks across Europe and the U.S.
method Employing Credit Default Swaps (CDS) and factor copulas, the paper proposes multi-factor, structured factor, and factor-vine models.
result Systematic contagion channel drives distress probabilities in the banking system as a whole, while regional factors are important within each region.
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 triggering each other through contagion. Although credit default swaps have radical…
Study quantifies financial contagion risks in supply chains.
problem Supply chain shocks contribute to financial losses.
method Multi-layer network framework, micro-dataset of Hungarian firms.
result Supply chain shocks amplify financial losses by 4-3x.
The paper validates overlaps between financial institutions to assess systemic risk.
problem Systemic risk from fire sales in financial institutions.
method Statistical validation of portfolio overlaps to build a network of contagion channels.
result Systemic risk increased before the 2007-2008 financial crisis and accelerated in 2013.
Study amplifies systemic risk in interbank markets due to credit and liquidity shocks.
problem Systemic risk in interbank markets due to credit and liquidity shocks.
method Defined Debt-Solvency Rank to estimate amplification of losses, implemented on European banks dataset.
result Liquidity spillovers substantially increase systemic risk and cannot be neglected in stress-test scenarios.
This paper analyzes how banking risks spread through sentiment and policy shocks.
problem Systemic risk in the U.S. banking system during the 2023 crisis.
method Time-Varying Parameter Vector Autoregression (TVP-VAR) model with 30-day rolling windows.
result Risk spillovers were driven by perceived similarities in bank business models under interest rate pressure.
This study quantifies systemic importance in global banks using a continuous framework that amplifies localized shocks.
problem Analyzing financial contagion and systemic risk in global banks.
method Developed a continuous framework incorporating geographic proximity and interbank network linkages, using a master equation and Feynman-Kac representation.
result The amplification factor correctly identifies systemically important institutions and predicts crisis outcomes.
Employs granular data to create a multilayer network for euro area banks, revealing distinct risk patterns.
problem Lack of comprehensive, granular data integration for systemic risk assessment in euro area banks.
method Constructs an empirically grounded multilayer network integrating various supervisory and statistical datasets, each layer representing a distinct transmission channel.
result Cross-layer heterogeneity in connectivity and centrality reveals economically relevant structure and misidentifies systemically important institutions.
DeFi exploits lead to reduced CP spreads, contrary to contagion hypothesis.
problem Vulnerabilities in DeFi destabilize traditional short-term funding markets.
method Analysis of commercial paper spreads and regulatory segmentation.
result DeFi exploits lead to a 'Flight-to-Quality' pattern, narrowing rather than widening CP spreads.
Model shows wealth taxes can cause sudden emigration waves, impacting GDP.
problem Estimating the economic impact of wealth taxes on emigration.
method Developed a social contagion model with tipping-point dynamics, embedded in Fokker-Planck framework.
result Micro-to-macro extrapolation requires five conditions to hold, violating each.
Method reconstructs networks from contagion dynamics.
problem Fitting contagion models assumes simple dynamics, ignoring complex contagions.
method Nonparametric method to reconstruct network and dynamics from node states.
result Networks are easier to reconstruct through complex contagions in dense or saturated networks.
Contagion maps detect network structure in noisy data.
problem Detecting underlying manifold structure in noisy data.
method Using activation times in threshold contagions to map network nodes to high-dimensional space.
result Contagion maps reliably detect manifold structure in noisy data, while Isomap fails.
The scope of financial systemic risk research encompasses a wide range of interbank channels and effects, including asset correlation shocks, default contagion, illiquidity contagion, and asset fire sales. This paper introduces a financial network model that combines the default and liquidity stress mechanisms into a "…
Extends contagion models to include direct and indirect impacts of defaults on the environment.
problem Capturing the impact of defaults on a broader economy.
method Introduces a new model allowing direct and indirect contagion within and from a default system.
result Shows how defaults within a system can affect the environment and vice versa.
New method detects currency contagion sources using causal inference.
problem Lack of causal interpretation in quantifying contagion among currencies.
method Network-based causal inference to identify contagion paths.
result Identifies sources of contagion and diversification options.
Study examines financial contagion at community level, finding increased contagion density and widespread transmission.
problem Understanding and managing financial contagion in interconnected markets.
method High-frequency data, Louvain community detection, Vector Autoregression, Tracy-Widom random matrix theory.
result Contagion density increases over time, and there is no significant difference between intra- and inter-community contagion.
Study identifies contagion in aggregated defaults despite environmental changes.
problem Identify contagion in aggregated default counts with fluctuating probabilities.
method Compare three contagion mechanisms (Davis-Lo, Torri, Vasicek) under i.i.d. and hierarchical specifications.
result Threshold contagion is largely absorbed into environmental heterogeneity, while cumulative contagion leaves a persistent signature.
Modeling dependent defaults with contagion effects.
problem Dependent defaults and their contagion effects.
method First passage time approach to structural framework.
result A new method to model default contagion.
Paper uses interbank contagion to predict U.S. bank defaults, finding it highly explanatory.
problem Predicting U.S. bank defaults using interbank contagion.
method Regression and neural network models were used to analyze U.S. commercial bank data.
result Interbank contagion is highly explanatory in default prediction, often outperforming established metrics.
New approach uses MST and copula-DCC-GARCH for systemic risk analysis in European insurance sector.
problem Analyzing systemic risk in European insurance sector through indirect connections.
method Combining copula-DCC-GARCH model and Minimum Spanning Trees (MST) for interlinkage dynamics analysis.
result Proposed approach useful for systemic risk analysis in insurance sector, with MST topological indicators as predictors.
Study financial contagion in investment funds using network analysis.
problem Measuring financial contagion in investment funds.
method Developed a network model combining cross-holding and bipartite structure.
result Identified contagion patterns and market stability.
The paper reconciles views on financial contagion, showing it depends on information availability.
problem Understanding how financial systems amplify external shocks.
method Developed a common framework for network contagion models.
result The extent of contagion depends on information availability, leading to different levels of loss amplification.
Study connects bank default models using dynamic contagion.
problem Understanding default contagion in heterogeneous interbank systems.
method Proposes a dynamic default contagion model with endogenous early defaults for a finite set of banks, reformulating as a stochastic particle system.
result Existence of clearing systems and continuity of the system response for the mean-field problem.
I show the equivalence between a model of financial contagion and the threshold model of global cascades proposed by Watts (2002). The model financial network comprises banks that hold risky external assets as well as interbank assets. It is shown that a simple threshold model can replicate the size and the frequency o…
iConViz helps banks manage default contagion risk in networked loans.
problem Managing default contagion risk in networked loans during economic downturns.
method Developed iConViz, an interactive tool, and a novel metric (contagion effect) to quantify and analyze the risk.
result iConViz facilitates closed-loop analysis and helps avoid ad hoc methods.
Study uses Hawkes processes to analyze stock market contagion in China.
problem Understanding contagion in Chinese stock market.
method Fitting Hawkes processes to daily returns and sector indices.
result Identifies long-term dependencies and trending patterns in sector indices.
Model simulates financial contagion through repo agreements.
problem Financial contagion through repo agreements.
method Agent-based model of financial intermediaries.
result Model accurately simulates financial contagion dynamics.
This paper models and evaluates contagion and stabilisation in interconnected financial markets.
problem Understanding and managing contagion and resilience in multilayer financial networks.
method Formulates an interconnected multiplex structure, models contagion mechanism, and designs minimum-cost stabilisation strategies.
result Empirically validated minimum-cost stabilisation strategies for multichannel contagion containment.
Study combines intra-risk and contagion risk for SME bankruptcy prediction.
problem Predicting bankruptcy risk of SMEs considering both intra-risk and contagion risk.
method Proposes a novel model using Graph Neural Networks to combine intra-risk and contagion risk.
result Model outperforms state-of-the-art methods in bankruptcy prediction.
Model financial contagion with dynamic interbank liabilities.
problem Model financial contagion with time dynamics of interbank liabilities.
method Generalized Eisenberg-Noe model with time dynamics, separating cash and capital accounts.
result Distinguish between delinquency and default, insolvency and illiquidity.
Modeling contagion effects in credit default risk with macroeconomic impact.
problem Capturing contagion and macroeconomic impacts on credit default risk.
method Set-valued Markov chain to model default process, deriving pricing formulas.
result Evidence supports contagion and macroeconomic risk as leading default factors.
Systemic risks of default contagion in the Russian interbank market are investigated. The analysis is based on considering the bow-tie structure of the weighted oriented graph describing the structure of the interbank loans. A probabilistic model of interbank contagion explicitly taking into account the empirical bow-t…
Model shows worldwide trade crises can be localized or global, depending on trade balance.
problem Understanding and predicting worldwide trade crises.
method Modeling worldwide trade network using Google matrix analysis and bankruptcy threshold.
result Crisis contagion is localized for high trade balance, global for low trade balance.
Study uses epidemiological models to analyze financial contagion risks.
problem Analyzing and controlling contagion risks in the global financial network.
method Formulated an optimal control problem based on infection spread models.
result The approach effectively describes the world economy's financial contagion.
Optimal credit and consumption strategies in a switching market with default contagion.
problem Optimal portfolio and consumption decisions in a credit market with default contagion.
method Cobb-Douglas utility, recursive ODE system, backward solution from all-default state.
result Existence and uniqueness of optimal feedback controls, verification theorem.
Measures risk contagion in financial networks using CoVaR.
problem Assessing stability of complex financial systems.
method Financial network model with bipartite graph of institutions and assets, heavy-tailed distributions, copula models, CoVaR and ECI.
result Proposes the Extreme CoVaR Index (ECI) for capturing risk contagion strength.
Deep learning predicts contagion dynamics on complex networks.
problem Forecasting contagion dynamics on complex networks is challenging.
method Graph neural network learns local mechanisms from time series data.
result Deep learning offers new and accurate models of contagion dynamics.
The interbank market is considered one of the most important channels of contagion. Its network representation, where banks and claims/obligations are represented by nodes and links (respectively), has received a lot of attention in the recent theoretical and empirical literature, for assessing systemic risk and identi…
This paper models financial contagion with endogenously determined market liquidity.
problem Financial contagion and its impact on market liquidity during price drops.
method Developed a joint clearing system for interbank payments, asset prices, and market liquidity, with endogenous market capacity.
result Endogenous market liquidity significantly affects system risk during financial contagion.