86,577 research outputs found
Taming financial systemic risk: models, instruments and early warning indicators
No full textIn recent decades, most advanced and developing economies have suffered—or are still suffering—from profound and repeated crises. The literature has reflected on the determinants of these perturbations by placing particular emphasis on the malfunctioning of either the real or financial sphere of the economy. The main research question has been to understand whether it was the real economy that perturbed finance sectors or, alternatively, the financial/credit market that depressed real production. Whatever the direction of the causality nexus and, consequently the origin of the attack, with some studies identifying the direction from real markets to financial sectors (see Bernanke and Gertler 1989; Greenwald and Stiglitz 1993; Delli Gatti et al. 2012) and others reversing it (see Christiano and Ikeda 2011; Brunnermeier et al. 2012), what is certainly undoubted is the self-reinforcing interaction between the two sectors, which translates into booms followed by busts. In light of this, part of the literature has not focused as much on the origin of crises, but rather on the mechanisms of shock propagation. In this regard, many studies have shown that a combination of forces is needed to generate shock transmission. Specifically, the literature on contagion has shown that agents’ interaction and the emerging network topology are key ingredients for the spread of systemic risk (see, for instance, Lux 2016; Lux and Montagna 2017). The interaction has in fact been recognized as generating two opposing effects: risk sharing, which decreases with connectivity, and systemic risk, which in contrast, increases with linkages (see, for instance, Allen and Gale 2000; Battiston et al. 2007, 2012a, b; Grilli et al. 2014; Iori et al. 2006; Mazzarisi et al. 2020; Tedeschi et al. 2012). Many other studies have confirmed the nonlinearity of this relationship. This body of work has also shown that other factors must be added to generate the catastrophic effects that characterized the 2007 financial collapse, namely the agents’ heterogeneity and financial fragility (see Aymanns et al. 2016; Bardoscia et al. 2017; Caccioli et al. 2011, 2014, 2015; Lenzu and Tedeschi 2012). In fact, as reported by Berardi and Tedeschi (2017) “on the one hand, the possible emergence of contagion depends crucially on the degree of heterogeneity. Indeed, when the agents’ balance sheets are heterogeneous, banks are not uniformly exposed to their counter-party. Therefore, if contagion is triggered by the failure of a big bank, which represents the highest source of exposure for its creditors, the situation is certainly worse than when agents are homogeneous [...]. On the other hand, the probability of default in credit markets is strictly linked to the presence of highly leveraged agents [...]. Indeed, when variations in the level of financial robustness of institutions tend to persist in time or to get amplified, financial linkages among financially fragile banks represent a propagation channel for contagion and a source of systemic risk.” Interestingly enough, this second element is very close in spirit to the Minskyan financial instability hypothesis, where endogenous shifts in the degree of financial fragility of agents generate business fluctuations and, possibly, the materialization of bankruptcy cascades (see Minsky 1964; Ferri and Minsky 1992)
Scalability and egalitarianism in peer-to-peer networks
No full textMany information-technology innovations are driven, in their early stages, by an egalitarian ethos that empowers individuals through dis-intermediation. Bitcoin and peer to peer financial systems were inspired by these egalitarian ambitions. However, in bitcoin we have recently witnessed a strong centralization around a few large mining pools, which puts control of most of the system in the hands of a few. In this chapter we investigate the physical limits of distributed consensus mechanisms over networks, and discuss whether there are scalability and efficiency reasons that incentivize centralization. We compute the time to reach majority consensus in a variety of settings, comparing egalitarian networks with centralized networks, and quantifying the effect of network topology on the propagation of information
Reciprocity and impact in academic careers
No full textThe growing importance of citation-based bibliometric indicators in shaping the prospects of academic careers incentivizes scientists to boost the numbers of citations they receive. Whereas the exploitation of self-citations has been extensively documented, the impact of reciprocated citations has not yet been studied. We study reciprocity in a citation network of authors, and compare it with the average reciprocity computed in an ensemble of null network models. We show that obtaining citations through reciprocity correlates negatively with an impactful career in the long term. Nevertheless, at the aggregate level we show evidence of a steady increase in reciprocity over the years, largely fuelled by the citations reciprocated between coauthors. Our results characterize the structure of author networks in a time of increasing emphasis on citation-based indicators, and we discuss their implications towards a fairer assessment of academic impact
Fixation-coexistence transition in spatial population
No full textAbstract – Balancing selection is a special case of frequency-dependent selection that is known to
be the major force for the maintenance of biodiversity and polymorphism in natural populations.
In finite populations, genetic drift eventually drives the population to fixation to the detriment of
biodiversity. The interplay between selection and genetic drift is much richer in spatially extended
populations, where the local density of individuals can be low even in the limit of infinitely large
systems. We consider the limit of low local density of individuals (strong genetic drift) that is well
represented by a modified voter model. We show analytically the existence of a non-equilibrium
phase transition between a region in which fixation always occurs and a coexistence phase for a
one-dimensional system. We also provide a characterization of the dynamical properties of the
system, in particular for what concerns the coarsening behavior and the speed of propagation of
heterozygosity above the threshold
The academic Great Gatsby Curve.
No full textThe Great Gatsby Curve measures the relationship between income inequality and intergenerational income persistence. By using genealogical data of over 245 000 mentor-mentee pairs and their academic publications from 22 different disciplines, this study demonstrates that an academic Great Gatsby Curve exists as well, in the form of a positive correlation between academic impact inequality and the persistence of impact across academic generations. We also provide a detailed breakdown of academic persistence, showing that the correlation between the impact of mentors and that of their mentees has increased over time, indicating an overall decrease in academic intergenerational mobility. We analyse such persistence across a variety of dimensions, including mentorship types, gender and institutional prestige
DebtRank: A microscopic foundation for shock propagation
No full textThe DebtRank algorithm has been increasingly investigated as a method to estimate the impact of shocks in financial networks, as it overcomes the limitations of the traditional default-cascade approaches. Here we formulate a dynamical "microscopic" theory of instability for financial networks by iterating balance sheet identities of individual banks and by assuming a simple rule for the transfer of shocks from borrowers to lenders. By doing so, we generalise the DebtRank formulation, both providing an interpretation of the effective dynamics in terms of basic accounting principles and preventing the underestimation of losses on certain network topologies. Depending on the structure of the interbank leverage matrix the dynamics is either stable, in which case the asymptotic state can be computed analytically, or unstable, meaning that at least one bank will default. We apply this framework to a dataset of the top listed European banks in the period 2008-2013. We find that network effects can generate an amplification of exogenous shocks of a factor ranging between three (in normal periods) and six (during the crisis) when we stress the system with a 0.5% shock on external (i.e. non-interbank) assets for all banks
Pathways towards instability in financial networks
No full textFollowing the financial crisis of 2007-2008, a deep analogy between the origins of instability in financial systems and complex ecosystems has been pointed out: in both cases, topological features of network structures influence how easily distress can spread within the system. However, in financial network models, the details of how financial institutions interact typically play a decisive role, and a general understanding of precisely how network topology creates instability remains lacking. Here we show how processes that are widely believed to stabilize the financial system, that is, market integration and diversification, can actually drive it towards instability, as they contribute to create cyclical structures which tend to amplify financial distress, thereby undermining systemic stability and making large crises more likely. This result holds irrespective of the details of how institutions interact, showing that policy-relevant analysis of the factors affecting financial stability can be carried out while abstracting away from such details
Dynamic Facilitation Picture of a Higher-Order Glass Singularity
No full textWe show that facilitated spin mixtures with a tunable facilitation reproduce, on a Bethe lattice, the simplest higher-order singularity scenario predicted by the mode-coupling theory (MCT) of liquid-glass transition. Depending on the facilitation strength, they yield either a discontinuous glass transition or a continuous one, with no underlying thermodynamic singularity. Similar results are obtained for facilitated spin models on a diluted Bethe lattice. The mechanism of dynamical arrest in these systems can be interpreted in terms of bootstrap and standard percolation and corresponds to a crossover from a compact to a fractal structure of the incipient spanning cluster of frozen spins. Theoretical and numerical simulation results are fully consistent with MCT predictions
Erratum: DebtRank: A microscopic foundation for shock propagation (PLoS ONE (2015) 10(7): e0134888 doi:10.1371/journal.pone.0134888)
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