Abstract
In this paper, we propose a dynamical model to capture cascading failures among interconnected organizations in the global financial system and develop a framework to investigate under which conditions organizations remain healthy. The contribution of this paper is threefold: i) we develop a dynamical model that describes the time evolution of the organizations' equity values given nonequilibrium initial conditions; ii) we characterize the equilibria for this model; and iii) we provide a computational method to anticipate potential propagation of failures.
Original language | English |
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Article number | 107122 |
Journal | Operations Research Letters |
Volume | 55 |
Early online date | 22 May 2024 |
DOIs | |
Publication status | Published - 1 Jul 2024 |
Keywords
- Systemic risk
- Financial network
- Financial contagion
- Stability analysis