Interaction uncertainty in financial networks
Year: 2024
Type: article
Abstract: A minimal stochastic dynamical model of the interbank network is introduced, with linear interactions mediated by an integral of recent variations. Defining stress as the variance over the banks' states, the interaction correction to the stress expectation is derived and studied on the short-medium timescale in an expansion. It is shown that, while different interaction matrices can amplify or absorb fluctuations, on average interactions increase the stress expectation. More in general, this analytical framework enables to estimate the impact of uncertainty about financial exposures, and to draw conclusions about the importance of disclosure.
Source: Chaos Solitons & Fractals
Author: Andrea Auconi
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,500
OpenAlex ID: W4402417409