The price of complexity in financial networks
Abstract
Estimating systemic risk in networks of financial institutions represents, today, a major challenge in both science and financial policy making. This work shows how the increasing complexity of the network of contracts among institutions comes with the price of increasing inaccuracy in the estimation of systemic risk. The paper offers a quantitative method to estimate systemic risk and its accuracy.
- Publication:
-
Proceedings of the National Academy of Science
- Pub Date:
- September 2016
- DOI:
- 10.1073/pnas.1521573113
- Bibcode:
- 2016PNAS..11310031B
- Keywords:
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- financial contagion;
- financial networks;
- complexity;
- default probability;
- systemic risk