On the effect of heterogeneity on flocking behavior and systemic risk

Fang Fei (), Sun Yiwei () and Spiliopoulos Konstantinos ()
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Fang Fei: Department of Mathematics and Statistics, Boston University, Boston, MA 02215, USA
Sun Yiwei: Department of Mathematics and Statistics, Boston University, Boston, MA 02215, USA
Spiliopoulos Konstantinos: Department of Mathematics and Statistics, Boston University, Boston, MA 02215, USA

Statistics & Risk Modeling, 2017, vol. 34, issue 3-4, 141-155

Abstract: The goal of this paper is to study organized flocking behavior and systemic risk in heterogeneous mean-field interacting diffusions. We illustrate in a number of case studies the effect of heterogeneity in the behavior of systemic risk in the system, i.e., the risk that several agents default simultaneously as a result of interconnections. We also investigate the effect of heterogeneity on the “flocking behavior” of different agents, i.e., when agents with different dynamics end up following very similar paths and follow closely the mean behavior of the system. Using Laplace asymptotics, we derive an asymptotic formula for the tail of the loss distribution as the number of agents grows to infinity. This characterizes the tail of the loss distribution and the effect of the heterogeneity of the network on the tail loss probability.

Keywords: Systemic risk; flocking behavior; heterogeneity; interacting diffusions (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1515/strm-2016-0013

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