How robust are financial connectedness networks? A network attack assessment

Robustness is the ability of a financial system to maintain its performance despite disruptions. We investigate the robustness of financial connectedness networks to address connectedness stability among financial institutions. We use robustness metrics to assess network robustness during simulated random and intentional attacks. For random attacks, we find that most robustness metrics gradually decrease on average during periods of financial distress but remain resilient. Under intentional attacks, network robustness varies when the institutions are attacked in ascending or descending order of market capitalization. Moreover, there are more robust risk spillover information exchanges in the network when large institutions are attacked than when small institutions are attacked.