Systemic risk in multiplex networks with asymmetric coupling and threshold feedback

Rebekka Burkholz, Matt V. Leduc, Antonios Garas and Frank Schweitzer

Papers from arXiv.org

Abstract: We study cascades on a two-layer multiplex network, with asymmetric feedback that depends on the coupling strength between the layers. Based on an analytical branching process approximation, we calculate the systemic risk measured by the final fraction of failed nodes on a reference layer. The results are compared with the case of a single layer network that is an aggregated representation of the two layers. We find that systemic risk in the two-layer network is smaller than in the aggregated one only if the coupling strength between the two layers is small. Above a critical coupling strength, systemic risk is increased because of the mutual amplification of cascades in the two layers. We even observe sharp phase transitions in the cascade size that are less pronounced on the aggregated layer. Our insights can be applied to a scenario where firms decide whether they want to split their business into a less risky core business and a more risky subsidiary business. In most cases, this may lead to a drastic increase of systemic risk, which is underestimated in an aggregated approach.

Date: 2015-06
New Economics Papers: this item is included in nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Physica D: Nonlinear Phenomena, Vol. 323--324, 64--72 (2016)

Downloads: (external link)
http://arxiv.org/pdf/1506.06664 Latest version (application/pdf)

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:arx:papers:1506.06664

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().