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Systemic risk analytics: A data-driven multi-agent financial network (MAFN) approach

Markose, SM (2013) 'Systemic risk analytics: A data-driven multi-agent financial network (MAFN) approach.' Journal of Banking Regulation, 14 (3-4). 285 - 305. ISSN 1745-6452

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Abstract

Systemic risk from financial intermediaries (FIs) refers to a negative externality problem, which is rife with fallacy of composition-type errors. To 'see' why seemingly rational behaviour at the level of an individual FI contributes to system-wide instability is a non-trivial exercise, which requires holistic visualization and modelling techniques. Paradox of volatility inherent to market price-based measures of systemic risk has made bilateral balance sheet and off balance data between FIs and network analysis essential for systemic risk management. There is both a data and a skills gap in implementing large-scale data-driven multi-agent financial network models that can operationalize macro-prudential policy. Different designs for a Pigou-type systemic risk surcharge are discussed with special reference to the Markose eigen-pair method, which simultaneously determines the degree of instability of the network of financial flows of obligors and also the rank order in the centrality of FIs contributing to it. © 2013 Macmillan Publishers Ltd.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 09 Jan 2015 14:16
Last Modified: 04 Feb 2019 11:16
URI: http://repository.essex.ac.uk/id/eprint/12248

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