Financial Systemic Risk: an Introduction

Topics and questions beind addressed include:

  1. What is systemic risk?
  2. What is the basic economic picture of the financial system as a random graph?
  3. What does the theory of ``small world'' random graphs hint about the nature of the financial system?
  4. What conclusions have resulted from various economic studies of the financial systems of various countries?
  5. What important effects did pre-crisis models miss that we can now learn from?
  6. What can mathematical finance say about systemic risk?
  7. Liquidity risk: how can it be better accounted for?

References

A. The 2009 perspective:

[Haldane09]

www.bankofengland.co.uk/publications/speeches/financialstability.htm

RETHINKING THE FINANCIAL NETWORK

Andrew G Haldane*

 

[Schwartz08]

Systemic Risk

Duke Law School Legal Studies

Research Paper Series

Research Paper No. 163

Steven L. Schwarcz

 

B. General Models of Systemic Risk

 

[AllenGale00]

http://ideas.repec.org/p/cla/levarc/2092.html

Financial Contagion by Franklin Allen and Douglas Gale -gives a model for contagion

 

[FreParRoc00]

http://ideas.repec.org/a/mcb/jmoncb/v32y2000i3p611-38.html

Systemic Risk, Interbank Relations, and Liquidity Provision by the Central Bank Freixas, Xavier Parigi, Bruno M Rochet, Jean-Charles

 

[NieYanYorAle09]

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1280788

Network Models and Financial Stability

Erlend Nier

Bank of England

Jing Yang

Bank of England

Tanju Yorulmazer

Federal Reserve Bank of New York

Amadeo Alentorn

University of Essex

April 1, 2008  Bank of England Working Paper No. 346

 

[Shin08]

http://www.princeton.edu/~hsshin/journal.htm

Securitisation and Financial Stability,

Economic Journal, 119, 309 – 332 (2009)

Hyun Song Shin

 

C. Studies of Specific Financial Systems

 

[Lehar05]

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=423984

Measuring Systemic Risk: A Risk Management Approach,Alfred Lehar

 

[ElsLehSum05]

http://ideas.repec.org/p/pra/mprapa/817.html

Using Market Information for Banking System Risk Assessment, Helmut Elsinger,a Alfred Lehar,b and Martin Summerc

 

[ElsLehSum06]

Risk Assessment for Banking Systems

Helmut Elsinger,a Alfred Lehar,b and Martin Summer

 

[Wells04]

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=641288

Financial interlinkages in the United Kingdom’s interbank market and the risk of contagion, Simon Wells

 

[Furfine99]

http://www.bis.org/publ/work70.pdf

BIS  WORKING  PAPERS

No.  70  –  June  1999

INTERBANK EXPOSURES: QUANTIFYING  THE  RISK  OF  CONTAGION Craig H Furfine

 

[UppeWorm02]

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=304454

Deutsche Bundesbank Discussion Paper No 09/02

 

Estimating Bilateral Exposures

in the German Interbank Market:

Is there a Danger of Contagion?

Christian Upper

Andreas Worms

 

[ContBast09]

Banking System Topology and Systemic Risk:

The Brazilian Network Empirical Analysis Rama Cont,  Edson Bastos e Santos

 

D. Random Graph Theory

 

[WattStro98]

Nature. 1998 Jun 4;393(6684):409-10.

Collective dynamics of 'small-world' networks.

 

Watts DJ, Strogatz SH.

Department of Theoretical and Applied Mechanics, Cornell University, Ithaca, New York 14853, USA. This e-mail address is being protected from spambots. You need JavaScript enabled to view it

 

[Watts02]

A simple model of global cascades on

random networks

Duncan J. Watts*

 

[BolBorChaRio08]

Directed Scale-Free Graphs

Bela Bollobas Christian Borgs Jennifer Chayes Oliver Riordan