Systemic Risk: Fire-Walling Financial Systems Using Network-Based Approaches

The latest financial crisis has painfully revealed the dangers arising from a globally interconnected financial system. Conventional approaches based on the notion of the existence of equilibrium and those which rely on statistical forecasting have seen to be inadequate to describe financial systems...

Full description

Saved in:

Bibliographic Details
Main Authors:	Sasidevan, V, Bertschinger, Nils
Format:	Journal Article
Language:	English
Published:	11-12-2019
Subjects:	Quantitative Finance - Statistical Finance Quantitative Finance - Trading and Microstructure
Online Access:	Get full text
Tags:	Add Tag No Tags, Be the first to tag this record!

Abstract	The latest financial crisis has painfully revealed the dangers arising from a globally interconnected financial system. Conventional approaches based on the notion of the existence of equilibrium and those which rely on statistical forecasting have seen to be inadequate to describe financial systems in any reasonable way. A more natural approach is to treat financial systems as complex networks of claims and obligations between various financial institutions present in an economy. The generic framework of complex networks has been successfully applied across several disciplines, e.g., explaining cascading failures in power transmission systems and epidemic spreading. Here we review various network models addressing financial contagion via direct inter-bank contracts and indirectly via overlapping portfolios of financial institutions. In particular, we discuss the implications of the "robust-yet-fragile" nature of financial networks for cost-effective regulation of systemic risk.
AbstractList	The latest financial crisis has painfully revealed the dangers arising from a globally interconnected financial system. Conventional approaches based on the notion of the existence of equilibrium and those which rely on statistical forecasting have seen to be inadequate to describe financial systems in any reasonable way. A more natural approach is to treat financial systems as complex networks of claims and obligations between various financial institutions present in an economy. The generic framework of complex networks has been successfully applied across several disciplines, e.g., explaining cascading failures in power transmission systems and epidemic spreading. Here we review various network models addressing financial contagion via direct inter-bank contracts and indirectly via overlapping portfolios of financial institutions. In particular, we discuss the implications of the "robust-yet-fragile" nature of financial networks for cost-effective regulation of systemic risk.
Author	Sasidevan, V Bertschinger, Nils
Author_xml	– sequence: 1 givenname: V surname: Sasidevan fullname: Sasidevan, V – sequence: 2 givenname: Nils surname: Bertschinger fullname: Bertschinger, Nils
BackLink	https://doi.org/10.48550/arXiv.1912.05273$$DView paper in arXiv https://doi.org/10.1007/978-981-13-8319-9_16$$DView published paper (Access to full text may be restricted)
BookMark	eNotj01OwzAYRL2ABZQegBW-gIOd2E7MrlSUIkVUKiCW0ec_sJo6kV0BvT20ZTWa0dNI7xKdxSE6hK4ZLXgjBL2F9BO-CqZYWVBR1tUFal_2eee2weB1yJs7vAjJkXfo-xA__kqEaAL0-ERl_JYP-7PbfQ9pQ-4hO4tn45gGMJ8uX6FzD3120_-coPXi4XW-JO3q8Wk-awmIkpJaSKo09U5Lx3ilmXY190qV1CqhrWm49QxMwxpBhTLGg6TW1JpJqTSvJujmdHqU6cYUtpD23UGqO0pVv-biSVg
ContentType	Journal Article
Copyright	http://arxiv.org/licenses/nonexclusive-distrib/1.0
Copyright_xml	– notice: http://arxiv.org/licenses/nonexclusive-distrib/1.0
DBID	GOX
DOI	10.48550/arxiv.1912.05273
DatabaseName	arXiv.org
DatabaseTitleList
Database_xml	– sequence: 1 dbid: GOX name: arXiv.org url: http://arxiv.org/find sourceTypes: Open Access Repository
DeliveryMethod	fulltext_linktorsrc
ExternalDocumentID	1912_05273
GroupedDBID	GOX
ID	FETCH-LOGICAL-a520-75609b0feb6e143b1be74f9920d95bdc84df1ac8185059ccfa60dc7b1669b43
IEDL.DBID	GOX
IngestDate	Mon Jan 08 05:39:40 EST 2024
IsDoiOpenAccess	true
IsOpenAccess	true
IsPeerReviewed	false
IsScholarly	false
Language	English
LinkModel	DirectLink
MergedId	FETCHMERGED-LOGICAL-a520-75609b0feb6e143b1be74f9920d95bdc84df1ac8185059ccfa60dc7b1669b43
OpenAccessLink	https://arxiv.org/abs/1912.05273
ParticipantIDs	arxiv_primary_1912_05273
PublicationCentury	2000
PublicationDate	2019-12-11
PublicationDateYYYYMMDD	2019-12-11
PublicationDate_xml	– month: 12 year: 2019 text: 2019-12-11 day: 11
PublicationDecade	2010
PublicationYear	2019
Score	1.7549788
SecondaryResourceType	preprint
Snippet	The latest financial crisis has painfully revealed the dangers arising from a globally interconnected financial system. Conventional approaches based on the...
SourceID	arxiv
SourceType	Open Access Repository
SubjectTerms	Quantitative Finance - Statistical Finance Quantitative Finance - Trading and Microstructure
Title	Systemic Risk: Fire-Walling Financial Systems Using Network-Based Approaches
URI	https://arxiv.org/abs/1912.05273
hasFullText	1
inHoldings	1
isFullTextHit
isPrint
link	http://sdu.summon.serialssolutions.com/2.0.0/link/0/eLvHCXMwdZ1NTwMhEIaJ25MXo1FTP8PBKwpbdlm8Ve3ag6lJ9dBbw8CQNCar6VrjzxfYbfTiFbgwBOYdZngg5MoIUBwxZ1gCZ2EnAtPIJVO2wsKOtLcYA8Xpi5otqodJxOTQ7VsYs_5efXV8YGhvQjCRX_PICMtIluexZOvxedElJxOKqx__Oy5ozNT0x0nU-2SvV3d03C3HAdnB5pA8dVTwlaXzVft2S-twyrB4gR28Bq23xAvas8NpSuLTWVeeze6Cl3F03JO_sT0i83ryej9l_ScGzBQhMlNBUWjgHqHEIE1AACrptc650wU4W0nnhbHRbQahY603JXdWgShLDXJ0TAbNe4NDQgG4cNYoKLiXjjtTOahKJ5XSRnpfnZBhmvjyo6NULKNNlskmp_93nZHdoADShwhCnJPB53qDFyRr3eYymfoHBw5-NA
link.rule.ids	228,230,782,887
linkProvider	Cornell University
openUrl	ctx_ver=Z39.88-2004&ctx_enc=info%3Aofi%2Fenc%3AUTF-8&rfr_id=info%3Asid%2Fsummon.serialssolutions.com&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Ajournal&rft.genre=article&rft.atitle=Systemic+Risk%3A+Fire-Walling+Financial+Systems+Using+Network-Based+Approaches&rft.au=Sasidevan%2C+V&rft.au=Bertschinger%2C+Nils&rft.date=2019-12-11&rft_id=info:doi/10.48550%2Farxiv.1912.05273&rft.externalDocID=1912_05273