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 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...

This paper examines the effects of liquidity during the 2007–09 crisis, focussing on the Senior Tranche of the CDX.NA.IG Index and on Moody's AAA Corporate Bond Index. It aims to understand whether the sharp increase in the credit spreads of these AAA-rated credit indices can be explained by...

We present a network model of the interbank market in which optimizing risk averse banks lend to each other and invest in non-liquid assets. Market clearing takes place through a tâtonnement process which yields the equilibrium price, while traded quantities are determined by means of a...

The study of tail events has become a central preoccupation for academics, investors and policy makers, given the recent financial turmoil. However, the question on what differentiates a crash from a tail event remains unsolved. This article elaborates a new definition of stock market crash...

The paper analyses the relationship between excessive credit growth and the development of systemic risk, which subsequently materializes into losses of banking sector credit portfolios. The systemic risk indicator captures the time dimension of systemic risk, and hence represents the function...

This article is dealing with the questions concerning in the stability of financial system. It considers systemic risk as a basic economic concept for the understanding the economic crises. This article is also dealing with the relationship between the systemic risk and liquidity risk. It notes...

Financial stress indexes provide a new tool for regulatory and public institutions, which participate in the supervision of financial markets and in the monitoring of the development of risk in financial markets. Our paper introduced a number of methods of building the financial stress index for...

We provide a new approach to understanding systemic risk by analysing complex linkages in finance and insurance sectors. The analysis is achieved by using a recently proposed method for quantifying causal coupling strength, which identifies the existence of causal dependencies between two...

Financial network analysis is used to provide firm level bottom-up holistic visualizations of interconnections of financial obligations in global OTC derivatives markets. This helps to identify Systemically Important Financial Intermediaries (SIFIs), analyse the nature of contagion propagation,...