Contagion in financial systems: a Bayesian network approach
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Publication:4635241
DOI10.1137/17M1116659zbMATH Open1408.91245arXiv1702.04287MaRDI QIDQ4635241FDOQ4635241
Authors: Carsten Chong, Claudia Klüppelberg 
Publication date: 16 April 2018
Published in: SIAM Journal on Financial Mathematics (Search for Journal in Brave)
Abstract: We develop a structural default model for interconnected financial institutions in a probabilistic framework. For all possible network structures we characterize the joint default distribution of the system using Bayesian network methodologies. Particular emphasis is given to the treatment and consequences of cyclic financial linkages. We further demonstrate how Bayesian network theory can be applied to detect contagion channels within the financial network, to measure the systemic importance of selected entities on others, and to compute conditional or unconditional probabilities of default for single or multiple institutions.
Full work available at URL: https://arxiv.org/abs/1702.04287
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Bayesian networksystemic riskfinancial contagionprobability of defaultmeasure of systemic riskmultivariate default riskstructural default risk model
Bayesian inference (62F15) Applications of graph theory (05C90) Stochastic network models in operations research (90B15) Actuarial science and mathematical finance (91G99)
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- A discrete dynamics approach to interbank financial contagion
- A network analysis of the volatility of high-dimensional financial series
- Financial instability contagion: a dynamical systems approach
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- Sensitivity of the Eisenberg-Noe clearing vector to individual interbank liabilities
- Brexit news propagation in financial systems: multidimensional visibility networks for market volatility dynamics
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