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Systemic Risk in Financial Networks: A Survey

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  • Matthew O. Jackson
  • Agathe Pernoud

Abstract

We provide an overview of the relationship between financial networks and systemic risk. We present a taxonomy of different types of systemic risk, differentiating between direct externalities between financial organizations (e.g., defaults, correlated portfolios and firesales), and perceptions and feedback effects (e.g., bank runs, credit freezes). We also discuss optimal regulation and bailouts, measurements of systemic risk and financial centrality, choices by banks' regarding their portfolios and partnerships, and the changing nature of financial networks.

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  • Matthew O. Jackson & Agathe Pernoud, 2020. "Systemic Risk in Financial Networks: A Survey," Papers 2012.12702, arXiv.org.
    • Handle: RePEc:arx:papers:2012.12702
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    More about this item

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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