We present a simple agent-based model of a financial system composed of leveraged investors such as banks that invest in stocks and manage their risk using a Value-at-Risk constraint, based on historical observations of asset prices. The Value-at-Risk constraint implies that when perceived risk...

We present a simple agent-based model of a financial system composed of leveraged investors such as banks that invest in stocks and manage their risk using a Value-at-Risk constraint, based on historical observations of asset prices. The Value-at-Risk constraint implies that when perceived risk...

We consider a model of contagion in financial networks recently introduced in the literature, and we characterize the effect of a few features empirically observed in real networks on the stability of the system. Notably, we consider the effect of heterogeneous degree distributions,...

In spite of the growing theoretical literature on cascades of failures in interbank lending networks, empirical results seem to suggest that networks of direct exposures are not the major channel of financial contagion. In this paper we show that networks of interbank exposures can however...

The practice of valuation by marking-to-market with current trading prices is seriously flawed. Under leverage the problem is particularly dramatic: due to the concave form of market impact, selling always initially causes the expected leverage to increase. There is a critical leverage above...

Common asset holdings are widely believed to have been the primary vector of contagion in the recent financial crisis. We develop a network approach to the amplification of financial contagion due to the combination of overlapping portfolios and leverage, and we show how it can be understood in...

Common asset holdings are widely believed to have been the primary vector of contagion in the recent financial crisis. We develop a network approach to the amplification of financial contagion due to the combination of overlapping portfolios and leverage, and we show how it can be understood in...

We study the problem of interacting channels of contagion in financial networks. The first channel of contagion is counterparty failure risk; this is captured empirically using data for the Austrian interbank network. The second channel of contagion is overlapping portfolio exposures; this is...

We consider a model of contagion in financial networks recently introduced in Gai, P. and Kapadia, S. [Contagion in financial networks, Proc. R. Soc. A 466(2120) (2010) 2401–2423], and we characterize the effect of a few features empirically observed in real networks on the stability of the...

We study the cost of coal-fired electricity in the United States between 1882 and 2006 by decomposing it in terms of the price of coal, transportation cost, energy density, thermal efficiency, plant construction cost, interest rate, capacity factor, and operations and maintenance cost. The...