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@article{Amini:2016:10.1111/mafi.12051,
author = {Amini, H and Cont, R and Minca, A},
doi = {10.1111/mafi.12051},
journal = {Mathematical Finance},
pages = {329--365},
title = {Resilience to Contagion in Financial Networks},
url = {http://dx.doi.org/10.1111/mafi.12051},
volume = {26},
year = {2016}
}

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TY  - JOUR
AB  - Propagation of balance-sheet or cash-flow insolvency across financialinstitutions may be modeled as a cascade process on a network representingtheir mutual exposures. We derive rigorous asymptotic results for the magnitudeof contagion in a large financial network and give an analytical expression forthe asymptotic fraction of defaults, in terms of network characteristics. Ourresults extend previous studies on contagion in random graphs to inhomogeneousdirected graphs with a given degree sequence and arbitrary distribution ofweights. We introduce a criterion for the resilience of a large financialnetwork to the insolvency of a small group of financial institutions andquantify how contagion amplifies small shocks to the network. Our resultsemphasize the role played by "contagious links" and show that institutionswhich contribute most to network instability in case of default have both largeconnectivity and a large fraction of contagious links. The asymptotic resultsshow good agreement with simulations for networks with realistic sizes.
AU  - Amini,H
AU  - Cont,R
AU  - Minca,A
DO  - 10.1111/mafi.12051
EP  - 365
PY  - 2016///
SN  - 0960-1627
SP  - 329
TI  - Resilience to Contagion in Financial Networks
T2  - Mathematical Finance
UR  - http://dx.doi.org/10.1111/mafi.12051
UR  - http://arxiv.org/abs/1112.5687v1
UR  - http://hdl.handle.net/10044/1/50633
VL  - 26
ER  -

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