A risk analysis for a system stabilized by a central agent
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Publication:3119643
DOI10.3233/RDA-160117zbMATH Open1409.91295arXiv1507.08333MaRDI QIDQ3119643FDOQ3119643
Authors: Tzu-Wei Yang, Josselin Garnier, George Papanicolaou 
Publication date: 12 March 2019
Published in: Risk and Decision Analysis (Search for Journal in Brave)
Abstract: We formulate and analyze a multi-agent model for the evolution of individual and systemic risk in which the local agents interact with each other through a central agent who, in turn, is influenced by the mean field of the local agents. The central agent is stabilized by a bistable potential, the only stabilizing force in the system. The local agents derive their stability only from the central agent. In the mean field limit of a large number of local agents we show that the systemic risk decreases when the strength of the interaction of the local agents with the central agent increases. This means that the probability of transition from one of the two stable quasi-equilibria to the other one decreases. We also show that the systemic risk increases when the strength of the interaction of the central agent with the mean field of the local agents increases. Following the financial interpretation of such models and their behavior given in our previous paper (Garnier, Papanicolaou and Yang, SIAM J. Fin. Math. 4, 2013, 151-184), we may interpret the results of this paper in the following way. From the point of view of systemic risk, and while keeping the perceived risk of the local agents approximately constant, it is better to strengthen the interaction of the local agents with the central agent than the other way around.
Full work available at URL: https://arxiv.org/abs/1507.08333
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