IDEAS home Printed from https://ideas.repec.org/p/arx/papers/1607.08287.html
   My bibliography  Save this paper

The effect of heterogeneity on flocking behavior and systemic risk

Author

Listed:
  • Fei Fang
  • Yiwei Sun
  • Konstantinos Spiliopoulos

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.

Suggested Citation

  • Fei Fang & Yiwei Sun & Konstantinos Spiliopoulos, 2016. "The effect of heterogeneity on flocking behavior and systemic risk," Papers 1607.08287, arXiv.org, revised Jun 2017.
    • Handle: RePEc:arx:papers:1607.08287
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/1607.08287
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Konstantinos Spiliopoulos, 2014. "Systemic Risk and Default Clustering for Large Financial Systems," Papers 1402.5352, arXiv.org, revised Feb 2015.
    2. Fouque,Jean-Pierre & Langsam,Joseph A. (ed.), 2013. "Handbook on Systemic Risk," Cambridge Books, Cambridge University Press, number 9781107023437, January.
    3. Kay Giesecke & Konstantinos Spiliopoulos & Richard B. Sowers, 2011. "Default clustering in large portfolios: Typical events," Papers 1104.1773, arXiv.org, revised Feb 2013.
    4. Konstantinos Spiliopoulos & Richard B. Sowers, 2013. "Default Clustering in Large Pools: Large Deviations," Papers 1311.0498, arXiv.org, revised Feb 2015.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hyun Jin Jang & Kiseop Lee & Kyungsub Lee, 2020. "Systemic risk in market microstructure of crude oil and gasoline futures prices: A Hawkes flocking model approach," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(2), pages 247-275, February.
    2. Zachary Feinstein & Andreas Sojmark, 2019. "A Dynamic Default Contagion Model: From Eisenberg-Noe to the Mean Field," Papers 1912.08695, arXiv.org.
    3. Li-Hsien Sun, 2022. "Mean Field Games with Heterogeneous Groups: Application to Banking Systems," Journal of Optimization Theory and Applications, Springer, vol. 192(1), pages 130-167, January.
    4. Yu-Jui Huang & Li-Hsien Sun, 2023. "Partial Information in a Mean-Variance Portfolio Selection Game," Papers 2312.04045, arXiv.org, revised Dec 2024.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Konstantinos Spiliopoulos & Jia Yang, 2018. "Network effects in default clustering for large systems," Papers 1812.07645, arXiv.org, revised Feb 2020.
    2. Fang Fei & Sun Yiwei & Spiliopoulos Konstantinos, 2017. "On the effect of heterogeneity on flocking behavior and systemic risk," Statistics & Risk Modeling, De Gruyter, vol. 34(3-4), pages 141-155, September.
    3. Josselin Garnier & George Papanicolaou & Tzu-Wei Yang, 2015. "A risk analysis for a system stabilized by a central agent," Papers 1507.08333, arXiv.org, revised Aug 2015.
    4. Ben Hambly & Andreas Søjmark, 2019. "An SPDE model for systemic risk with endogenous contagion," Finance and Stochastics, Springer, vol. 23(3), pages 535-594, July.
    5. Ben Hambly & Nikolaos Kolliopoulos, 2020. "Fast mean-reversion asymptotics for large portfolios of stochastic volatility models," Finance and Stochastics, Springer, vol. 24(3), pages 757-794, July.
    6. Ben Hambly & Andreas Sojmark, 2018. "An SPDE Model for Systemic Risk with Endogenous Contagion," Papers 1801.10088, arXiv.org, revised Sep 2018.
    7. Justin Sirignano & Kay Giesecke, 2019. "Risk Analysis for Large Pools of Loans," Management Science, INFORMS, vol. 65(1), pages 107-121, January.
    8. Agostino Capponi & Xu Sun & David D. Yao, 2020. "A Dynamic Network Model of Interbank Lending—Systemic Risk and Liquidity Provisioning," Mathematics of Operations Research, INFORMS, vol. 45(3), pages 1127-1152, August.
    9. Jean-David Fermanian, 2020. "On the Dependence between Default Risk and Recovery Rates in Structural Models," Annals of Economics and Statistics, GENES, issue 140, pages 45-82.
    10. Egami, M. & Kevkhishvili, R., 2017. "An analysis of simultaneous company defaults using a shot noise process," Journal of Banking & Finance, Elsevier, vol. 80(C), pages 135-161.
    11. Anand Deo & Sandeep Juneja, 2021. "Credit Risk: Simple Closed-Form Approximate Maximum Likelihood Estimator," Operations Research, INFORMS, vol. 69(2), pages 361-379, March.
    12. Rama Cont & Darrell Duffie & Paul Glasserman & Chris Rogers & Fernando Vega-Redondo, 2016. "Preface to the Special Issue on Systemic Risk: Models and Mechanisms," Operations Research, INFORMS, vol. 64(5), pages 1053-1055, October.
    13. Burzoni, Matteo & Campi, Luciano, 2023. "Mean field games with absorption and common noise with a model of bank run," Stochastic Processes and their Applications, Elsevier, vol. 164(C), pages 206-241.
    14. Xiangge Luo & Alexander Schied, 2018. "Nash equilibrium for risk-averse investors in a market impact game with transient price impact," Papers 1807.03813, arXiv.org, revised Jun 2019.
    15. Alexander Schied & Tao Zhang, 2013. "A market impact game under transient price impact," Papers 1305.4013, arXiv.org, revised May 2017.
    16. Frikha, Noufel & Li, Libo, 2021. "Well-posedness and approximation of some one-dimensional Lévy-driven non-linear SDEs," Stochastic Processes and their Applications, Elsevier, vol. 132(C), pages 76-107.
    17. Anand Deo & Sandeep Juneja, 2019. "Credit Risk: Simple Closed Form Approximate Maximum Likelihood Estimator," Papers 1912.12611, arXiv.org.
    18. Delarue, F. & Inglis, J. & Rubenthaler, S. & Tanré, E., 2015. "Particle systems with a singular mean-field self-excitation. Application to neuronal networks," Stochastic Processes and their Applications, Elsevier, vol. 125(6), pages 2451-2492.
    19. Anastasia Borovykh & Andrea Pascucci & Stefano La Rovere, 2018. "Systemic risk in a mean-field model of interbank lending with self-exciting shocks," IISE Transactions, Taylor & Francis Journals, vol. 50(9), pages 806-819, September.
    20. Amarjit Budhiraja & Michael Conroy, 2022. "Empirical Measure and Small Noise Asymptotics Under Large Deviation Scaling for Interacting Diffusions," Journal of Theoretical Probability, Springer, vol. 35(1), pages 295-349, March.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:1607.08287. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.