Flow dynamics in financial networks
Abstract
En
In this paper we analyse the dynamics of flows of losses and of flows of liquidity in financial networks, using an approach based on the theory of flow networks. To this end, we represent financial networks as flow networks, i.e., directed and weighted graphs endowed with source nodes and sink nodes. We then model the 'domino', i.e., the diffusion of losses and defaults along the links of the network, and the transfer of liquidity across interbank networks. JEL classification: C63, G10, G33.
In this paper we analyse the dynamics of flows of losses and of flows of liquidity in financial networks, using an approach based on the theory of flow networks. To this end, we represent financial networks as flow networks, i.e., directed and weighted graphs endowed with source nodes and sink nodes. We then model the 'domino', i.e., the diffusion of losses and defaults along the links of the network, and the transfer of liquidity across interbank networks. JEL classification: C63, G10, G33.
DOI Code:
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Keywords:
contagion; nancial networks; systemic risk; liquidity risk
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