Network dynamics and systemic risks 

Advanced Systems Analysis (ASA) Program researchers develop dynamic network models of ecological, economic, and social systems. A particular focus is made on the financial systemic risk and cascading failures in the inter-bank lending network.

Contemporary global systems are increasingly intra- and inter-dependent. Actions and interactions of individual actors, even if being rather small, can catalyze significant cascading effects making the whole system susceptible to profound systemic risk. ASA develops approaches to modeling network dynamics and to assessing and managing systemic risk in ecological, economic, and social systems.

In previous works, ASA researchers introduced the notion of the systemic riskiness of individual nodes, i.e., their contribution to the overall systemic risk. It was shown that an indicator based on the node’s centrality and the centrality of its neighbors (similar to PageRank) can be used to quantify the node’s systemic riskiness. 

In previous works, ASA researchers introduced the notion of the systemic risk increment (marginal systemic risk) of an individual financial transaction, i.e., its contribution to the overall systemic risk. Knowing the marginal systemic risk of individual transactions opens a way to a completely new approach to manage financial systemic risk by re-shaping the topology of financial networks. 



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Last edited: 10 February 2016

CONTACT DETAILS

Stefan Thurner

Senior Research Scholar

Advanced Systems Analysis

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