Resilience to contagion in financial networks

Mathematical Finance

Volumn 26, Issue 2, 2016, Pages 329-365

  Amini, Hamed ^a   Cont, Rama ^b   Minca, Andreea ^c  

^a EPFL   (Switzerland)

^b CNRS   (France)

^c School of Chemical and Molecular Engineering   (United States)

Author keywords

Default contagion; Financial stability; Interbank network; Macroprudential regulation; Random graphs; Systemic risk

Indexed keywords

EID: 84960101214     PISSN: 09601627     EISSN: 14679965     Source Type: Journal    
DOI: 10.1111/mafi.12051     Document Type: Article

References (37)

1. Allen, F., and D. Gale (2000): Financial Contagion, J. Polit. Econ. 108(1), 1-33.
2. Amini, H. (2010a): Bootstrap Percolation and Diffusion in Random Graphs with Given Vertex Degrees, Electron. J. Comb. 17, R25.
3. Amini, H. (2010b): Bootstrap Percolation in Living Neural Networks, J. Stat. Phys. 141, 459-475.
4. Amini, H., R. Cont, and A. Minca (2012a): Stress Testing the Resilience of Financial Networks, Int. J. Theor. Appl. Finance 15(1), 1250006-1-1250006-20.
5. Amini, H., A. Minca, and A. Sulem (2012b): Optimal Equity Infusions in Interbank Networks, Preprint available at http://ssrn.com/paper=2128476.
6. Balogh, J., and B. Bollobás (2006): Bootstrap Percolation on the Hypercube, Probab. Theory Related Fields 134(4), 624-648.
7. Balogh, J., and B. G. Pittel (2007): Bootstrap Percolation on the Random Regular Graph, Random Struct. Algorithms 30(1-2), 257-286.
8. Battiston, S., D. D. Gatti, M. Gallegati, B. Greenwald, and J. E. Stiglitz (2012): Liaisons Dangereuses: Increasing Connectivity, Risk Sharing, and Systemic Risk, J. Econ. Dyn. Control. 36(8), 1121-1141.
9. Bech, M. L., and E. Atalay (2010): The Topology of the Federal Funds Market, Phys. A: Stat. Mech. Appl. 389(22), 5223-5246.
10. Blanchard, P., C.-H. Chang, and T. Krüger (2003): Epidemic Thresholds on Scale-Free Graphs: The Interplay between Exponent and Preferential Choice, Ann. Henri Poincaré 4(suppl. 2), S957-S970.
11. Bollobás, B. (2001): Random Graphs, 2nd ed., Cambridge Studies in Advanced Mathematics, Cambridge, UK: Cambridge University Press.
12. Boss, M., H. Elsinger, M. Summer, and S. Thurner (2004): Network Topology of the Interbank Market, Quantit. Finance 4(6), 677-684.
13. Chung, F., and L. Lu (2002): Connected Components in Random Graphs with Given Expected Degree Sequences, Ann. Comb. 6, 125-145.
14. Cont, R., A. Moussa, and E. B. Santos (2012): Network Structure and Systemic Risk in Banking Systems, in Handbook of Systemic Risk, J.-P. Fouque and J. Langsam, eds., Cambridge, UK: Cambridge University Press.
15. Cooper, C., and A. M. Frieze (2004): The Size of the Largest Strongly Connected Component of a Random Digraph with a Given Degree Sequence, Comb. Probab. Comput. 13(3), 319-337.
16. Eisenberg, L., and T. H. Noe (2001): Systemic Risk in Financial Systems, Manage. Sci. 47(2), 236-249.
17. Elsinger, H., A. Lehar, and M. Summer (2006): Risk Assessment for Banking Systems, Manage. Sci. 52(9), 1301-1314.
18. Fountoulakis, N. (2007): Percolation on Sparse Random Graphs with Given Degree Sequence, Internet Math. 4(4), 329-356.
19. Furfine, C. H. (1999): The Microstructure of the Federal Funds Market, Financ. Markets Inst. Instrum. 8(5), 24-44.
20. Gai, P., and S. Kapadia (2010): Contagion in Financial Networks, Proc. R. Soc. A 466(2120), 2401-2423.
21. Graham, C. (2008): Chaoticity for Multiclass Systems and Exchangeability within Classes, J. Appl. Probab. 45(4), 1196-1203.
22. Hellwig, M. (1995): Systemic Aspects of Risk Management in Banking and Finance, Swiss J. Econ. Stat. 131, 723-737.
23. Holroyd, A. E. (2003): Sharp Metastability Threshold for Two-Dimensional Bootstrap Percolation, Prob. Theory Related Fields 125(2), 195-224.
24. Hurewicz, W. (1958): Lectures on Ordinary Differential Equations, Cambridge, MA: The Technology Press of the Massachusetts Institute of Technology.
25. Janson, S. (2009a): On Percolation in Random Graphs with Given Vertex Degrees, Electron. J. Probab. 14, 86-118.
26. Janson, S. (2009b): The Probability That a Random Multigraph Is Simple, Comb. Prob. Comput. 18(1-2), 205-225.
27. Kiyotaki, N., and J. Moore (2002): Balance-Sheet Contagion, Am. Econ. Rev. 92(2), 46-50.
28. Lelarge, M. (2012): Diffusion and Cascading Behavior in Random Networks, Games Econ. Behav. 75(2), 752-775.
29. May, R. M., and N. Arinaminpathy (2010): Systemic Risk: The Dynamics of Model Banking Systems, J. R. Soc. Interf. 7(46), 823-838.
30. Minca, A. (2011): Mathematical Modeling of Default Contagion. PhD thesis, Université Paris VI (Pierre et Marie Curie).
31. Molloy, M., and B. Reed (1998): The Size of the Giant Component of a Random Graph with a Given Degree Sequence, Comb. Probab. Comput. 7, 295-305.
32. Nier, E., J. Yang, T. Yorulmazer, and A. Alentorn (2007): Network Models and Financial Stability, J. Econ. Dyn. Control 31(6), 2033-2060.
33. Rochet, J.-C., and J. Tirole (1996): Interbank Lending and Systemic Risk, J. Money Credit Bank. 28(4), 733-762.
34. Soramaki, K., M.L. Bech, J. Arnold, R. J. Glass, and W. E. Beyeler (2007): The Topology of Interbank Payment Flows, Phys. A: Stat. Mech. Appl. 379(1), 317-333.
35. Upper, C. (2011): Simulation Methods to Assess the Danger of Contagion in Interbank Markets, J. Financ. Stab. 7, 111-125.
36. Watts, D. J. (2002): A Simple Model of Global Cascades on Random Networks, Proc. Natl. Acad. Sci. USA 99(9), 5766-5771.
37. Wormald, N. (1995): Differential Equations for Random Processes and Random Graphs, Ann. Appl. Probab. 5(4), 1217-1235.