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On the Fictitious Default Algorithm in Fuzzy Financial Networks

Author

Listed:
  • Giuseppe De Marco

    (Università di Napoli Parthenope and CSEF)

  • Chiara Donnini

    (Università di Napoli Parthenope)

  • Federica Gioia

    (Università di Napoli Parthenope)

  • Francesca Perla

    (Università di Napoli Parthenope)

Abstract

In the literature on financial contagion, the possibility to deal only with imprecise information about the overall interbank exposures and the implications in the analysis of the stability of the financial system seems to be a relevant problem. In particular, previous literature has shown that fuzzy data arise naturally in this framework and turn to be sufficiently friendly to handle from the computational point of view. The present paper generalizes the well known_fictitious default algorithm to the fuzzy setting, providing an existence result for the corresponding fuzzy fixed points, the convergence of the algorithm to fixed points, an implementation of the algorithm in MATLAB and numerical simulations.

Suggested Citation

  • Giuseppe De Marco & Chiara Donnini & Federica Gioia & Francesca Perla, 2019. "On the Fictitious Default Algorithm in Fuzzy Financial Networks," CSEF Working Papers 535, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    • Handle: RePEc:sef:csefwp:535
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    File URL: http://www.csef.it/WP/wp535.pdf
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    References listed on IDEAS

    as
    1. Glasserman, Paul & Young, H. Peyton, 2015. "How likely is contagion in financial networks?," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 383-399.
    2. Lee, Seung Hwan, 2013. "Systemic liquidity shortages and interbank network structures," Journal of Financial Stability, Elsevier, vol. 9(1), pages 1-12.
    3. Gai, Prasanna & Haldane, Andrew & Kapadia, Sujit, 2011. "Complexity, concentration and contagion," Journal of Monetary Economics, Elsevier, vol. 58(5), pages 453-470.
    4. Seung Hwan Lee, 2013. "Systemic Liquidity Shortages and Interbank Network Structures," Working Papers 2013-4, Economic Research Institute, Bank of Korea.
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    Keywords

    Financial networks; fuzzy financial data; fictitious default; fixed point.;
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