Interconnectedness in the world economy poses major challenges in monitoring financial fluxes and risks, previously unrelated financial institutions may hold similar instruments and be subject to similar risks that may propagate in their own networks of financial counterparties. Modeling systemic risk I try to make sense of structural data on financial interconnections and portfolio overlaps, considering probable economic scenarios and deriving possible patterns of financial risk propagation at a national and international level.
Paolo Barucca, PhD 