Systemic stress test model for shared portfolio networks

Date
2021-02-08
Authors
Vodenska, Irena
Dehmamy, Nima
Becker, Alexander P.
Buldyrev, Sergey V.
Havlin, Shlomo
Version
Published version
OA Version
Citation
I. Vodenska, N. Dehmamy, A.P. Becker, S.V. Buldyrev, S. Havlin. 2021. "Systemic stress test model for shared portfolio networks.." Sci Rep, Volume 11, Issue 1, pp. 3358 - ?. https://doi.org/10.1038/s41598-021-82904-y
Abstract
We propose a dynamic model for systemic risk using a bipartite network of banks and assets in which the weight of links and node attributes vary over time. Using market data and bank asset holdings, we are able to estimate a single parameter as an indicator of the stability of the financial system. We apply the model to the European sovereign debt crisis and observe that the results closely match real-world events (e.g., the high risk of Greek sovereign bonds and the distress of Greek banks). Our model could become complementary to existing stress tests, incorporating the contribution of interconnectivity of the banks to systemic risk in time-dependent networks. Additionally, we propose an institutional systemic importance ranking, BankRank, for the financial institutions analyzed in this study to assess the contribution of individual banks to the overall systemic risk.
Description
License
© The Author(s) 2021. Open Access. This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made. The images or other third party material in this article are included in the article’s Creative Commons license, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons license and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/.