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Lookup NU author(s): Dr Thanos Verousis
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY-NC-ND).
© 2017 Informa UK Limited, trading as Taylor & Francis Group 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.
Author(s): Sergueiva A, Chinthalapati R, Verousis T, Chen L
Publication type: Article
Publication status: Published
Journal: Quantitative Finance
Year: 2017
Volume: 17
Issue: 12
Pages: 1885-1904
Online publication date: 20/09/2017
Acceptance date: 30/06/2017
Date deposited: 07/12/2017
ISSN (print): 1469-7688
ISSN (electronic): 1469-7696
Publisher: Routledge
URL: https://doi.org/10.1080/14697688.2017.1357973
DOI: 10.1080/14697688.2017.1357973
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