23 September 2017
Stefan Thurner gave a talk on "Systemic risk management by restructuring financial networks" and Sebastian Poledna gave a talk on "Quantification of systemic risk from overlapping portfolios in Mexico" and a talk on "Economic Forecasting with an Agent-based Model".
Quantification of systemic risk from overlapping portfolios in Mexico
Financial markets are exposed to systemic risk, the risk that a substantial fraction of the system ceases to function, and collapses. Systemic risk can propagate through different mechanisms and channels of contagion. One important form of financial contagion arises from indirect interconnections between financial institutions mediated by financial markets. This indirect interconnection occurs when financial institutions invest in common assets and is referred to as overlapping portfolios. In this work we quantify systemic risk from overlapping portfolios. Having complete information of security holdings of major Mexican financial intermediaries and the ability to uniquely identify securities in their portfolios allows us to represent the Mexican financial system as a bipartite network of securities and financial institutions. This makes it possible to quantify systemic risk arising from overlapping portfolios. We show that focusing only on direct exposures underestimates total systemic risk levels by up to 50%. By representing the financial system as a multi-layer network of direct exposures (default contagion) and indirect exposures (overlapping portfolios) we estimate the mutual influence of different channels of contagion. The method presented here is the first objective data-driven quantification of systemic risk on national scales that includes overlapping portfolios.
Last edited: 12 April 2018
Conference on Complex Systems 2017
Systemic Risk and Network Dynamics
Poledna, S., Martínez-Jaramillo, S., Caccioli, F., & Thurner, S. (2020). Quantification of systemic risk from overlapping portfolios in the financial system. Journal of Financial Stability, p. 100808. 10.1016/j.jfs.2020.100808. (In Press)
Hochrainer-Stigler, S., Colon, C., Boza, G., Poledna, S., Rovenskaya, E. , & Dieckmann, U. (2020). Enhancing Resilience of Systems to Individual and Systemic Risk: Steps toward An Integrative Framework. International Journal of Disaster Risk Reduction 51, e101868. 10.1016/j.ijdrr.2020.101868.
Hochrainer-Stigler, S., Colon, C., Boza, G., Brännström, Å., Linnerooth-Bayer, J., Pflug, G. , Poledna, S., Rovenskaya, E. , et al. (2019). Measuring, modeling, and managing systemic risk: the missing aspect of human agency. Journal of Risk Research, 1-17. 10.1080/13669877.2019.1646312.
Hochrainer-Stigler, S., Pflug, G. , Dieckmann, U. , Rovenskaya, E. , Thurner, S., Poledna, S., Boza, G., Linnerooth-Bayer, J., et al. (2018). Integrating Systemic Risk and Risk Analysis Using Copulas. International Journal of Disaster Risk Science 9 (4), 561-567. 10.1007/s13753-018-0198-1.
Pichler, A., Poledna, S., & Thurner, S. (2018). Systemic-risk-efficient asset allocation: Minimization of systemic risk as a network optimization problem. Journal of Financial Stability (In Press)
Leduc, M.V., Poledna, S., & Thurner, S. (2017). Systemic risk management in financial networks with credit default swaps. The Journal of Network Theory in Finance 3 (3), 19-39. 10.21314/JNTF.2017.034.
Poledna, S., Bochmann, O., & Thurner, S. (2017). Basel III capital surcharges for G-SIBs are far less effective in managing systemic risk in comparison to network-based, systemic risk-dependent financial transaction taxes. Journal of Economic Dynamics and Control 77, 230-246. 10.1016/j.jedc.2017.02.004.
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