Systemic Risk and Network Dynamics

The Systemic Risk and Network Dynamics project will examine how different types of systems, ranging from financial to ecological and beyond, are at risk of cascades of failures. As well as assessing this risk, this cross-cutting project will develop tools to help prevent such events.

©2011 iStockphoto LP

©2011 iStockphoto LP

Overview

Systemic risk describes the likelihood of an entire system breaking down—a situation caused by cascades of failures in the networks that make up the system. Knowledge of such risk can be invaluable. The global economic crisis brought to light the importance of understanding how disturbances spread through financial systems, for example. Epidemics of infectious diseases and the spread of forest fires also illustrate the underlying principals, and importance, of systemic risk.

Crucially, although all systems have unique characteristics, they also share common features. This project will draw together these commonalities to create a general framework for analyzing systemic risk. Once this framework is in place it can be used to assess and reduce risks in a diverse array of applications.

IIASA research

This cross-cutting project aims to develop methods to measure and reduce systemic risk and to provide tools to assess the potential for system collapse, even under uncertainty. This is vital because situations in which specifics about a network’s dynamics are unknown are common in the real world. The researchers will also investigate techniques for guiding the system back to normal after a cascade of failures.

The project will assess risk in ecological systems (under the IIASA Evolution and Ecology program), financial systems (under the Advanced Systems Analysis program), and the global insurance system (under the Risk, Policy and Vulnerability program).

Specifically, three case studies will be examined in depth:

  • Food webs. As biodiversity declines, we need to understand how species loss will affect ecosystem functioning. Using real-world food-web data, the researchers will analyze under what conditions species loss can set off a cascade of subsequent extinctions.
  • Financial crises. As financial systems become increasingly complex and interconnected there is a recognized need for early warnings of systemic failures, even under conditions of high uncertainty.
  • Global insurance and climate-change risks. As climate change progresses and climate-related disasters become more common, there is a need ensure robust insurance for cascading failures to allow households, towns and countries to recover from such events.

Events

23 May 2016
IIASA joins Complexity Science Hub Vienna

At the Visions for Complexity Conference, organized by the Complexity Science Hub Vienna (CSH), IIASA was officially ann... More

Invited Talks

Pia-Johanna Schweizer visited IIASA

Pia-Johanna Schweizer from the Institute for Advanced Sustainability Studies (IASS), Potsdam, Germany visited IIASA in the framework of the Systemic Risk and Network Dynamics project and gave a talk on "Governance of systemic risks: Challenges for decision and policy making" on 25 April, 2017. More









Vittorio Loreto visited IIASA

Vittorio Loreto (Sapienza University of Rome, Italy) visited IIASA and gave a talk in the framework of the Systemic Risk and Network Dynamics project on "Gaming, innovation and learning: new tools to face societal challenges" on 26 February, 2016. More

Miguel Centeno visited IIASA

Miguel Centeno (Princeton University, USA) visited IIASA on 23 June, 2016 and gave a talk on "Global Systemic Risk". More









Babak Heydari visited ASA, IIASA

Babak Heydari (Stevens Institute of Technology, Hoboken, USA) visited the Advanced System Analysis program on 17 June, 2016 and gave a talk in the framework of the Systemic Risk and Network Dynamics project on "A structural perspective on governance of complex socio-technical systems". More









Stefan Pickl and Martin Zsifkovits visited ASA, IIASA

Prof. Dr. Stefan Pickl and Dr. Martin Zsifkovits visited the Advanced System Analysis program on 18 January 2016 and gave a talk in the framework of the Systemic Risk and Network Dynamics project on Simulation and Optimization of Critical Infrastructures and PUMA - Public Management Analytics. More


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Last edited: 26 July 2016

CONTACT DETAILS

Ulf Dieckmann

Program Director

Evolution and Ecology

SA-YSSP Dean (IIASA)

Capacity Building and Academic Training

T +43(0) 2236 807 386

CONTACT DETAILS

Joanne Linnerooth-Bayer

Acting Program Director

Risk and Resilience

YSSP Dean

Young Scientists Summer Program

T +43(0) 2236 807 308

CONTACT DETAILS

Elena Rovenskaya

Program Director

Advanced Systems Analysis

T +43(0) 2236 807 608

Timeframe

2014 - 2017

PUBLICATIONS

Gephart JA, Rovenskaya E, Dieckmann U, Pace ML, & Brännström Å (2016). Vulnerability to shocks in the global seafood trade network. Environmental Research Letters 11: e035008. DOI:10.1088/1748-9326/11/3/035008.

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.

Klimek P, Obersteiner M, & Thurner S (2015). Systemic trade risk of critical resources. Science Advances 1 (10): e1500522. DOI:10.1126/sciadv.1500522.

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.

Shanafelt DW, Dieckmann U, Jonas M, Franklin O, Loreau M, & Perrings C (2015). Biodiversity, productivity, and the spatial insurance hypothesis revisited. Journal of Theoretical Biology 380: 426-435. DOI:10.1016/j.jtbi.2015.06.017.

Kovacevic RM & Pflug G (2015). Measuring systemic risk: structural approaches. In: Quantitative Financial Risk Management: Theory and Practice. Eds. Zopounidis, C & (Eds.), G. Galariotis, pp. 1-21 Hoboken, NJ, USA: John Wiley & Sons. ISBN 9781118738184 DOI:10.1002/9781119080305.ch1.

Leduc MV & Momot R (2015). Strategic investment in protection in networked systems. In: Proceedings, "Web and Internet Economics", 11th International Conference, WINE 2015. pp. p. 434 Amsterdam, The Netherlands. ISBN 978-3-662-48994-9

Veshchinskaya V, Brannstrom A, Rovenskaya E, & Dieckmann U (2012). Ecosystem Vulnerability to Species Loss. In: Worlds Within Reach: From Science To Policy - IIASA 40th Anniversary Conference, 24-26 October 2012, Hofburg Congress Center, Vienna and IIASA, Laxenburg, Austria.

International Institute for Applied Systems Analysis (IIASA)
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