IDEAS home Printed from https://ideas.repec.org/p/arx/papers/1907.11622.html
   My bibliography  Save this paper

Network and Agent Dynamics with Evolving Protection against Systemic Risk

Author

Listed:
  • Chulwook Park

Abstract

The dynamics of protection processes has been a fundamental challenge in systemic risk analysis. The conceptual principle and methodological techniques behind the mechanisms involved [in such dynamics] have been harder to grasp than researchers understood them to be. In this paper, we show how to construct a large variety of behaviors by applying a simple algorithm to networked agents, which could, conceivably, offer a straightforward way out of the complexity. The model starts with the probability that systemic risk spreads. Even in a very random social structure, the propagation of risk is guaranteed by an arbitrary network property of a set of elements. Despite intensive systemic risk, the potential of the absence of failure could also be driven when there has been a strong investment in protection through a heuristically evolved protection level. It is very interesting to discover that many applications are still seeking the mechanisms through which networked individuals build many of these protection process or mechanisms based on fitness due to evolutionary drift. Our implementation still needs to be polished against what happens in the real world, but in general, the approach could be useful for researchers and those who need to use protection dynamics to guard against systemic risk under intrinsic randomness in artificial circumstances.

Suggested Citation

  • Chulwook Park, 2019. "Network and Agent Dynamics with Evolving Protection against Systemic Risk," Papers 1907.11622, arXiv.org.
    • Handle: RePEc:arx:papers:1907.11622
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/1907.11622
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Andrea Galeotti & Brian W. Rogers, 2013. "Strategic Immunization and Group Structure," American Economic Journal: Microeconomics, American Economic Association, vol. 5(2), pages 1-32, May.
    2. Rogelio Oliva, 2016. "Structural dominance analysis of large and stochastic models," System Dynamics Review, System Dynamics Society, vol. 32(1), pages 26-51, January.
    3. Kane, Edward J, 1990. "Principal-Agent Problems in S&L Salvage," Journal of Finance, American Finance Association, vol. 45(3), pages 755-764, July.
    4. Gilsing, Victor & Nooteboom, Bart & Vanhaverbeke, Wim & Duysters, Geert & van den Oord, Ad, 2008. "Network embeddedness and the exploration of novel technologies: Technological distance, betweenness centrality and density," Research Policy, Elsevier, vol. 37(10), pages 1717-1731, December.
    5. Dominic D. P. Johnson & James H. Fowler, 2011. "The evolution of overconfidence," Nature, Nature, vol. 477(7364), pages 317-320, September.
    6. Atul Gupta & Lalatendu Misra, 1999. "Failure and Failure Resolution in the US Thrift and Banking Industries," Financial Management, Financial Management Association, vol. 28(4), Winter.
    7. Dirk Helbing, 2013. "Globally networked risks and how to respond," Nature, Nature, vol. 497(7447), pages 51-59, May.
    8. Matt V. Leduc & Sebastian Poledna & Stefan Thurner, 2016. "Systemic Risk Management in Financial Networks with Credit Default Swaps," Papers 1601.02156, arXiv.org, revised Oct 2017.
    9. Nima Dehmamy & Soodabeh Milanlouei & Albert-László Barabási, 2018. "A structural transition in physical networks," Nature, Nature, vol. 563(7733), pages 676-680, November.
    10. Alessandro Vespignani, 2018. "Twenty years of network science," Nature, Nature, vol. 558(7711), pages 528-529, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chulwook Park, 2020. "Interconnected Conditions of Homogeneous and Heterogeneous Behavior in Agent-Based Models- Matrix with Calculated Vectors," Biomedical Journal of Scientific & Technical Research, Biomedical Research Network+, LLC, vol. 25(4), pages 19333-19341, February.
    2. Michael Koetter & Mr. Tigran Poghosyan & Thomas Kick, 2010. "Recovery Determinants of Distressed Banks: Regulators, Market Discipline, or the Environment?," IMF Working Papers 2010/027, International Monetary Fund.
    3. Balint, T. & Lamperti, F. & Mandel, A. & Napoletano, M. & Roventini, A. & Sapio, A., 2017. "Complexity and the Economics of Climate Change: A Survey and a Look Forward," Ecological Economics, Elsevier, vol. 138(C), pages 252-265.
    4. Gropp, R. & Grundl, C. & Guttler, A., 2012. "Does Discretion in Lending Increase Bank Risk? Borrower Self-Selection and Loan Officer Capture Effects," Other publications TiSEM bfec5360-2a2b-47e4-ba3f-d, Tilburg University, School of Economics and Management.
    5. Kane, Edward J. & Klingebiel, Daniela, 2004. "Alternatives to blanket guarantees for containing a systemic crisis," Journal of Financial Stability, Elsevier, vol. 1(1), pages 31-63, September.
    6. Sellevåg, Stig Rune, 2021. "Changes in inoperability for interdependent industry sectors in Norway from 2012 to 2017," International Journal of Critical Infrastructure Protection, Elsevier, vol. 32(C).
    7. Masciandaro, D. & Nieto, M. & Prast, H.M., 2007. "Financial Governance of Banking Supervision," Other publications TiSEM 65d7ff26-dca3-4da3-86ff-6, Tilburg University, School of Economics and Management.
    8. Koetter, Michael & Krause, Thomas & Tonzer, Lena, 2019. "Delay determinants of European Banking Union implementation," European Journal of Political Economy, Elsevier, vol. 58(C), pages 1-20.
    9. Igor Linkov & Benjamin Trump & Greg Kiker, 2022. "Diversity and inclusiveness are necessary components of resilient international teams," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-5, December.
    10. Goodkin-Gold, Matthew & Kremer, Michael & Snyder, Christopher M. & Williams, Heidi, 2022. "Optimal vaccine subsidies for endemic diseases," International Journal of Industrial Organization, Elsevier, vol. 84(C).
    11. Sweldens, Steven & Puntoni, Stefano & Paolacci, Gabriele & Vissers, Maarten, 2014. "The bias in the bias: Comparative optimism as a function of event social undesirability," Organizational Behavior and Human Decision Processes, Elsevier, vol. 124(2), pages 229-244.
    12. Quitterie Roquebert & Jonathan Sicsic & Thomas Rapp, 2021. "Health measures and long-term care use in the European frail population," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 22(3), pages 405-423, April.
    13. Xiao‐Bing Hu & Hang Li & XiaoMei Guo & Pieter H. A. J. M. van Gelder & Peijun Shi, 2019. "Spatial Vulnerability of Network Systems under Spatially Local Hazards," Risk Analysis, John Wiley & Sons, vol. 39(1), pages 162-179, January.
    14. Cowan, Arnold R. & Salotti, Valentina, 2015. "The resolution of failed banks during the crisis: Acquirer performance and FDIC guarantees, 2008–2013," Journal of Banking & Finance, Elsevier, vol. 54(C), pages 222-238.
    15. de Jong, Jeroen P.J. & Freel, Mark, 2010. "Absorptive capacity and the reach of collaboration in high technology small firms," Research Policy, Elsevier, vol. 39(1), pages 47-54, February.
    16. Guiyang Zhang, 2021. "Employee co-invention network dynamics and firm exploratory innovation: the moderation of employee co-invention network centralization and knowledge-employee network equilibrium," Scientometrics, Springer;Akadémiai Kiadó, vol. 126(9), pages 7811-7836, September.
    17. Lorenzo Cassi & Anne Plunket, 2014. "Proximity, network formation and inventive performance: in search of the proximity paradox," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(2), pages 395-422, September.
    18. Battke, Benedikt & Schmidt, Tobias S. & Stollenwerk, Stephan & Hoffmann, Volker H., 2016. "Internal or external spillovers—Which kind of knowledge is more likely to flow within or across technologies," Research Policy, Elsevier, vol. 45(1), pages 27-41.
    19. repec:plo:pone00:0090265 is not listed on IDEAS
    20. Man Li & Tao Ye & Peijun Shi & Jian Fang, 2015. "Impacts of the global economic crisis and Tohoku earthquake on Sino–Japan trade: a comparative perspective," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 75(1), pages 541-556, January.
    21. Ely, David P. & Varaiya, Nikhil P., 1996. "Opportunity costs incurred by the RTC in cleaning up S&L insolvencies," The Quarterly Review of Economics and Finance, Elsevier, vol. 36(3), pages 291-310.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:1907.11622. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.