Capturing financial network linkages and contagion in stress test models are important goals for banking supervisors and central banks responsible for micro- and macroprudential policy. However, granular data on financial networks is often lacking, and instead the networks must be reconstructed...

In complex and interconnected banking systems, counterparty risk does not depend only on the risk of the immediate counterparty but also on the risk of others in the network of exposures. However, frequently, market participants do not observe the actual network of exposures. I propose an...

We develop a network model whose links are governed by banks' optmizing decisions and by an endogenous tâtonnement market adjustment. Banks in our model can default and engage in re-sales: risk is transmitted through direct and cascading counterparty defaults as well as through indirect...

We study social learning in a social network setting where agents receive independent noisy signals about the truth. Agents naïvely update beliefs by repeatedly taking weighted averages of neighbors' opinions. The weights are fixed in the sense of representing average frequency and intensity of...

We consider any network environment in which the best shot game is played. This is the case where the possible actions are only two for every node (0 and 1), and the best response for a node is 1 if and only if all her neighbors play 0. A natural application of the model is one in which the...

We compare networks constructed using five commonly used methods and publicly available daily market data to networks based on reported exposures along several dimensions of the balance sheet, i.e., loans, bonds, equity. Our findings suggest that while the global network structure remains...

To date, macroprudential policy inspired by the Basel III package is applied irrespective of the network characteristics of the banking system. We study how the implementation of macroprudential policy in the form of additional capital requirements conditional to systemic-risk measures of banks...

We study the interplay between two channels of interconnectedness in the banking system. The first one is a direct interconnectedness, via a network of interbank loans, banks' loans to other corporate and retail clients, and securities holdings. The second channel is an indirect...

Do labor mobility, and co-worker networks contribute to convergence or divergence between regions? Based on the previous literature, labor mobility contributes to knowledge transfer between firms. Therefore, mobility may contribute to decreasing productivity differences, while limited mobility...