A Network Model of Super-systemic Crises
Although the financial systems of advanced countries have weathered numerous shocks in recent years, the events triggered by the sub-prime crisis of August 2007 have been “super-systemic” in scope, enveloping financial institutions across the major economies as well as far away Iceland and New Zeala...
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ftrepec:oai:RePEc:chb:bcchwp:542 2024-04-14T08:13:40+00:00 A Network Model of Super-systemic Crises Prasanna Gai Sujit Kapadia https://si2.bcentral.cl/public/pdf/documentos-trabajo/pdf/dtbc542.pdf unknown https://si2.bcentral.cl/public/pdf/documentos-trabajo/pdf/dtbc542.pdf preprint ftrepec 2024-03-19T10:30:09Z Although the financial systems of advanced countries have weathered numerous shocks in recent years, the events triggered by the sub-prime crisis of August 2007 have been “super-systemic” in scope, enveloping financial institutions across the major economies as well as far away Iceland and New Zealand. In this paper, we apply network techniques to develop a framework for analyzing financial contagion that isolate the probability of contagion from its potential spread. Our results suggest that complex financial systems may be robust-yet-fragile in nature. Under plausible assumptions, the greater connectivity implied by new financial instruments (e.g., credit derivatives) reduces the likelihood of contagion. But the impact on the financial system, in the event of problems, can be on a significantly larger scale than before. Report Iceland RePEc (Research Papers in Economics) New Zealand |
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RePEc (Research Papers in Economics) |
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Although the financial systems of advanced countries have weathered numerous shocks in recent years, the events triggered by the sub-prime crisis of August 2007 have been “super-systemic” in scope, enveloping financial institutions across the major economies as well as far away Iceland and New Zealand. In this paper, we apply network techniques to develop a framework for analyzing financial contagion that isolate the probability of contagion from its potential spread. Our results suggest that complex financial systems may be robust-yet-fragile in nature. Under plausible assumptions, the greater connectivity implied by new financial instruments (e.g., credit derivatives) reduces the likelihood of contagion. But the impact on the financial system, in the event of problems, can be on a significantly larger scale than before. |
format |
Report |
author |
Prasanna Gai Sujit Kapadia |
spellingShingle |
Prasanna Gai Sujit Kapadia A Network Model of Super-systemic Crises |
author_facet |
Prasanna Gai Sujit Kapadia |
author_sort |
Prasanna Gai |
title |
A Network Model of Super-systemic Crises |
title_short |
A Network Model of Super-systemic Crises |
title_full |
A Network Model of Super-systemic Crises |
title_fullStr |
A Network Model of Super-systemic Crises |
title_full_unstemmed |
A Network Model of Super-systemic Crises |
title_sort |
network model of super-systemic crises |
url |
https://si2.bcentral.cl/public/pdf/documentos-trabajo/pdf/dtbc542.pdf |
geographic |
New Zealand |
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New Zealand |
genre |
Iceland |
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Iceland |
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https://si2.bcentral.cl/public/pdf/documentos-trabajo/pdf/dtbc542.pdf |
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1796311694443544576 |