23 September 2017

ASA researchers participated in the Conference on Complex Systems 2017

The Conference on Complex Systems 2017 took place in Cancun, Mexico on 17-22 September, 2017. Participants of the conference discussed how the scientific study of complex systems can offer a method for understanding how elements interactions give rise to global properties, while at the same time these properties constrain elements.

Stefan Thurner gave a talk on "Systemic risk management by restructuring financial networks" and Sebastian Poledna gave a talk on "Quantification of systemic risk from overlapping portfolios in Mexico" and a talk on "Economic Forecasting with an Agent-based Model".

Quantification of systemic risk from overlapping portfolios in Mexico

Financial markets are exposed to systemic risk, the risk that a substantial fraction of the system ceases to function, and collapses. Systemic risk can propagate through different mechanisms and channels of contagion. One important form of financial contagion arises from indirect interconnections between financial institutions mediated by financial markets. This indirect interconnection occurs when financial institutions invest in common assets and is referred to as overlapping portfolios. In this work we quantify systemic risk from overlapping portfolios. Having complete information of security holdings of major Mexican financial intermediaries and the ability to uniquely identify securities in their portfolios allows us to represent the Mexican financial system as a bipartite network of securities and financial institutions. This makes it possible to quantify systemic risk arising from overlapping portfolios. We show that focusing only on direct exposures underestimates total systemic risk levels by up to 50%. By representing the financial system as a multi-layer network of direct exposures (default contagion) and indirect exposures (overlapping portfolios) we estimate the mutual influence of different channels of contagion. The method presented here is the first objective data-driven quantification of systemic risk on national scales that includes overlapping portfolios.

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Last edited: 12 April 2018


Stefan Thurner

Senior Research Scholar

Advanced Systems Analysis


Sebastian Poledna

Research Scholar

Risk and Resilience

Advanced Systems Analysis

T +43(0) 2236 807 261

Conference on Complex Systems 2017

Systemic Risk and Network Dynamics

Cross-cutting project


Pichler A, Poledna S, & Thurner S (2018). Systemic-risk-efficient asset allocation: Minimization of systemic risk as a network optimization problem. Journal of Financial Stability (In Press)

Leduc MV, Poledna S, & Thurner S (2017). Systemic risk management in financial networks with credit default swaps. The Journal of Network Theory in Finance 3 (3): 19-39. DOI:10.21314/JNTF.2017.034.

Poledna S, Bochmann O, & Thurner S (2017). Basel III capital surcharges for G-SIBs are far less effective in managing systemic risk in comparison to network-based, systemic risk-dependent financial transaction taxes. Journal of Economic Dynamics and Control 77: 230-246. DOI:10.1016/j.jedc.2017.02.004.

Leduc MV, Poledna S, & Thurner S (2016). Systemic Risk Management in Financial Networks with Credit Default Swaps. SSRN Electronic Journal: 1-20. DOI:10.2139/ssrn.2713200.

Poledna S & Thurner S (2016). Elimination of systemic risk in financial networks by means of a systemic risk transaction tax. Quantitative Finance: 1-15. DOI:10.1080/14697688.2016.1156146.

Poledna S, Molina-Borboa JL, Martinez-Jaramillo S, van der Leij M, & Thurner S (2015). The multi-layer network nature of systemic risk and its implications for the costs of financial crises. Journal of Financial Stability 20: 70-81. DOI:10.1016/j.jfs.2015.08.001.

Poledna S, Thurner S, Farmer JD, & Geanakoplos J (2014). Leverage-induced systemic risk under Basle II and other credit risk policies. Journal of Banking & Finance 42 (1): 199-212. DOI:10.1016/j.jbankfin.2014.01.038.

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