Towards a proper assignment of systemic risk: the combined roles of network topology and shock characteristics

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dc.contributor.author Loepfe, Lasse
dc.contributor.author Cabrales, Antonio
dc.contributor.author Sánchez, Angel
dc.date.accessioned 2015-07-13T08:20:47Z
dc.date.available 2015-07-13T08:20:47Z
dc.date.issued 2013-10-17
dc.identifier.bibliographicCitation PLOS ONE 8 (2013), 10-e77526, pp. 1-11
dc.identifier.issn 1932-6203
dc.identifier.uri http://hdl.handle.net/10016/21397
dc.description This proceeding at: European Conference on Complex Systems, took place 2013, setember, 16-20, in Barcelona (Spain).
dc.description.abstract The 2007-2008 financial crisis solidified the consensus among policymakers that a macro-prudential approach to regulation and supervision should be adopted. The currently preferred policy option is the regulation of capital requirements, with the main focus on combating procyclicality and on identifying the banks that have a high systemic importance, those that are "too big to fail". Here we argue that the concept of systemic risk should include the analysis of the system as a whole and we explore systematically the most important properties for policy purposes of networks topology on resistance to shocks. In a thorough study going from analytical models to empirical data, we show two sharp transitions from safe to risky regimes: 1) diversification becomes harmful with just a small fraction (~2%) of the shocks sampled from a fat tailed shock distributions and 2) when large shocks are present a critical link density exists where an effective giant cluster forms and most firms become vulnerable. This threshold depends on the network topology, especially on modularity. Firm size heterogeneity has important but diverse effects that are heavily dependent on shock characteristics. Similarly, degree heterogeneity increases vulnerability only when shocks are directed at the most connected firms. Furthermore, by studying the structure of the core of the transnational corporation network from real data, we show that its stability could be clearly increased by removing some of the links with highest centrality betweeness. Our results provide a novel insight and arguments for policy makers to focus surveillance on the connections between firms, in addition to capital requirements directed at the nodes.
dc.description.sponsorship his project was founded by ERA-Net on Complexity through grant RESINEE http://www.complexitynet.eu/Pages/default.aspx), by MINECO (Spain, http://www.mineco.gob.es/portal/site/mineco/) through grant PRODIEVO and by Comunidad de Madrid through grant MODELICO-CM (http://modelico.es/index.php/es/). The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.publisher Public Library of Science (PLOS)
dc.rights © 2013 Autores
dc.rights Atribución-NoComercial-SinDerivadas 3.0 España
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.title Towards a proper assignment of systemic risk: the combined roles of network topology and shock characteristics
dc.type article
dc.type conferenceObject
dc.description.status Publicado
dc.relation.publisherversion http://dx.doi.org/10.1371/journal.pone.0077526
dc.subject.eciencia Matemáticas
dc.identifier.doi 10.1371/journal.pone.0077526
dc.rights.accessRights openAccess
dc.relation.projectID Gobierno de España. FIS2011-22449/PRODIEVO
dc.relation.projectID Comunidad de Madrid. S2009/ESP-1691/MODELICO
dc.type.version publishedVersion
dc.relation.eventdate 2013, setember, 16-20
dc.relation.eventplace Barcelona (Spain)
dc.relation.eventtitle European Conference on Complex Systems (ECCS'13)
dc.relation.eventtype proceeding
dc.identifier.publicationfirstpage 1
dc.identifier.publicationissue 10-e77526
dc.identifier.publicationlastpage 11
dc.identifier.publicationtitle PLOS ONE (2013), 10-e77526, pp. 1-11
dc.identifier.publicationvolume 8
dc.identifier.uxxi CC/0000022175
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