EconPapers    
Economics at your fingertips  
 

Multichannel contagion and systemic stabilisation strategies in interconnected financial markets

Antoaneta Sergueiva, V. L. Raju Chinthalapati, Thanos Verousis () and Louisa Chen

Quantitative Finance, 2017, vol. 17, issue 12, 1885-1904

Abstract: To date, existing studies that use multilayer networks, in their multiplex form, to analyse the structure of financial systems, have (i) considered the structure as a non-interconnected multiplex network, (ii) no mechanism of multichannel contagion has been modelled and empirically evaluated and (iii) no multichannel stabilisation strategies for pre-emptive contagion containment have been designed. This paper formulates an interconnected multiplex structure, and a contagion mechanism among financial institutions due to bilateral exposures arising from institutions’ activity within different interconnected markets that compose the overall financial market. We design minimum-cost stabilisation strategies that act simultaneously on different markets and their interconnections, in order to effectively contain potential contagion progressing through the overall structure. The empirical simulations confirm their capability for containing contagion. The potential for multichannel contagion through the multiplex contributes more to systemic fragility than single-channel contagion, however, multichannel stabilisation also contributes more to systemic resilience than single-channel stabilisation.

Date: 2017
References: View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1080/14697688.2017.1357973 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:quantf:v:17:y:2017:i:12:p:1885-1904

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RQUF20

DOI: 10.1080/14697688.2017.1357973

Access Statistics for this article

Quantitative Finance is currently edited by Michael Dempster and Jim Gatheral

More articles in Quantitative Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

 
Page updated 2020-07-24
Handle: RePEc:taf:quantf:v:17:y:2017:i:12:p:1885-1904