Inhomogeneous Financial Networks and Contagious Links

• 成果类型: Article
• 署名作者: Amini, Hamed; Minca, Andreea
• 署名单位: University of Miami; Cornell University
• 刊物名称: OPERATIONS RESEARCH
• ISSN/ISSBN: 0030-364X
• DOI: 10.1287/opre.2016.1540
• 发表日期: 2016
• 页码: 1109-1120
• 关键词: bootstrap percolation; Systemic risk; diffusion; STABILITY

摘要

We propose a framework for testing the possibility of large cascades in financial networks. This framework accommodates a variety of specifications for the probabilities of emergence of contagious links conditional on a macroeconomic shock, where a contagious link leads to the default of a bank following the default of its counterparty. Under general contagion mechanisms and incomplete information, the financial network is modeled as an inhomogeneous random graph, where the conditional probabilities of having contagious links depend on banks' characteristics. We give different bounds on the size of the cascade through contagious links and derive testable conditions for this cascade to be small.