Mitigating financial cascades in scale-free networks

Video in TIB AV-Portal: Mitigating financial cascades in scale-free networks

Formal Metadata

Title
Mitigating financial cascades in scale-free networks
Alternative Title
Mitigating distress cascades in financial networks
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License
CC Attribution - NonCommercial - NoDerivatives 2.5 Switzerland:
You are free to use, copy, distribute and transmit the work or content in unchanged form for any legal and non-commercial purpose as long as the work is attributed to the author in the manner specified by the author or licensor.
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Release Date
2012
Language
English

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Subject Area
Abstract
We use a simple model of distress propagation (the sandpile model) to shows how financial systems are naturally subject to the risk of systemic failures. Taking into account possible network structures among financial institutions, we investigate if simple policies can limit financial distress propagation to avoid system-wide crises, i.e. to dampen systemic risk. We therefore compare different immunization policies (targeted helps to financial institutions) and find that the information coming from the network topology allows to mitigate systemic cascades by targeting just few institutions. Furthermore, our analysis points that ”Rich Clubs” can significatively enhance the effects of targeted policies for securing the financial network. This result represents a higly controversial point from the perspective of policy makers trying to enforce a free market and to avoid oligopolies.
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  484 ms - page object

Version

AV-Portal 3.21.3 (19e43a18c8aa08bcbdf3e35b975c18acb737c630)
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