We implement a novel method to detect systemically important financial institutions in a network. The method consists in a simple model of distress and losses redistribution derived from the interaction of banks' balance-sheets through bilateral exposures. The algorithm goes beyond the...

\begin{abstract} We analyse time series of CDS spreads for a set of major US and European institutions on a period overlapping the recent financial crisis. We extend the existing methodology of \emph{$\varepsilon$-drawdowns} to the one of \emph{joint $\varepsilon$-drawups}, in order to estimate...

We introduce a general framework for models of cascade and contagion processes on networks, to identify their commonalities and differences. In particular, models of social and financial cascades, as well as the fiber bundle model, the voter model, and models of epidemic spreading are recovered...

We model the systemic risk associated with the so-called balance-sheet amplification mechanism in a system of banks with interlocked balance sheets and with positions in real-economy-related assets. Our modeling framework integrates a stochastic price dynamics with an active balance-sheet...

We explore the dynamics of default cascades in a network of credit interlinkages in which each agent is at the same time a borrower and a lender. When some counterparties of an agent default, the loss she experiences amounts to her total exposure to those counterparties. A possible conjecture in...

This paper contributes to a growing literature on the pitfalls of diversification by shedding light on a new mechanism under which, full risk diversification can be sub-optimal. In particular, banks must choose the optimal level of diversification in a market where returns display a bimodal...

We develop a novel stress-test framework to monitor systemic risk in financial systems. The modular structure of the framework allows to accommodate for a variety of shock scenarios, methods to estimate interbank exposures and mechanisms of distress propagation. The main features are as follows....

We study the topological structure of the network of shareholding relationships in the Italian stock market (MIB) and in two US stock markets (NYSE and NASDAQ). The portfolio diversification and the wealth invested on the market by economical agents have been shown in our previous work to have...

We investigate the efficiency and stability of R&D networks in a model with network-dependent indirect spillovers. We show that the efficient network structure critically depends on the marginal cost of R&D collaborations. When the marginal cost is low, the complete graph is efficient, while...

We propose a network description of large market investments, where both stocks and shareholders are represented as vertices connected by weighted links corresponding to shareholdings. In this framework, the in-degree (kin) and the sum of incoming link weights (v) of an investor correspond to...