BDF Tutorials: Network based stress testing

When: 14:00-16:00 Tuesday 10 January 2017

Where: Room 406,  Andreasstrasse 15, Building AND, 8050 Zurich

Introduction to financial contagion (1/2 h) [BDF2017_Presentation]

1. Connectedness in Finance
2. Systemic Risk
3. Liquidity, solvency, and distress contagion
4. Mechanisms of interbank contagion
   1. Ex-post clearing and partial exogenous recovery
   2. Ex-post clearing and full endogenous recovery
   3. Ex-post clearing and partial endogenous recovery
   4. Ex-ante local uncertainty and no endogenous recovery
   5. Ex-ante local uncertainty and endogenous recovery
5. Perspectives

Exercises (1 h)  [BDF2017_Exercises]

• Furfine method, GitHub [1]
• Eisenberg-Noe method,GitHub [2]
• Rogers Veraart method, GitHub [3]
• Debt Rank, GitHub [4a,4b]
• NeVa, GitHub [5]

[1] Furfine, Craig. “The interbank market during a crisis.” European Economic Review 46, no. 4 (2002): 809-820.

[2] Eisenberg, Larry, and Thomas H. Noe. “Systemic risk in financial systems.” Management Science 47, no. 2 (2001): 236-249.

[3] Rogers, Leonard CG, and Luitgard AM Veraart. “Failure and rescue in an interbank network.” Management Science 59, no. 4 (2013): 882-898.

[4a] Battiston, Stefano, Michelangelo Puliga, Rahul Kaushik, Paolo Tasca, and Guido Caldarelli. “Debtrank: Too central to fail? financial networks, the fed and systemic risk.” Scientific reports 2 (2012).

[4b] Bardoscia, Marco, Stefano Battiston, Fabio Caccioli, and Guido Caldarelli. “DebtRank: A microscopic foundation for shock propagation.” PloS one 10, no. 6 (2015): e0130406.

[5] Barucca, Paolo, Marco Bardoscia, Fabio Caccioli, Marco D’Errico, Gabriele Visentin, Stefano Battiston, and Guido Caldarelli. “Network valuation in financial systems.” (2016).

[6] Glasserman, Paul, and Peyton Young. “Contagion in financial networks.” OFR WP (2015): 15-21.