Statistical Physics Approach to Financial Networks

Speaker: Adam Avakian

When: December 4, 2013 (Wed), 03:30PM to 04:30PM (add to my calendar)
Location: PRB 261

This event is part of the Preliminary Oral Exam.

Examining Committee:

H. Eugene Stanley Tulika Bose William Skocpol Plamen Ch. Ivanov

Abstract: Interconnectedness in bank networks can be thought to be both good and bad. On the one hand, more connections means more pathways through which failure can spread. On the other hand, more connections also means a sharing of the financial burden when one node fails. We propose a model in which the largest 2000 firms in the world represent the nodes of a bank network linked by credit exposure. Using Monte Carlo methods, we find that the more links among the network of firms, the greater the risk of failure across the network, resulting in economic disaster. We also propose potential controls on the model, akin to financial regulations, which could lower the risk of systemwide failure.

Adam