ECB workshop on “Recent advances in modelling systemic risk using network analysis”

European Central Bank (ECB) organized a workshop with the above title last Monday, 5th of October. It was the first event of this scale gathering researchers applying network theory and network analysis on banking, financial stability and systemic risk topics. The introductory remarks to the workshop were given by Gertrude Tumpel-Gugerell, Member of the ECB’s Executive Board.

I provided an introduction to network theory and financial network analysis entitled “Is network theory the best hope for regulating systemic risk?“ in which I developed topics of an earlier post with the same title: How to measure the systemic importance of a bank, can regulators promote safer financial topologies and is it possible to devise early-warning indicators from real-time transaction data?

Sheri Markose presented a working paper “Too interconnected to fail” where she, Simone Giansante and colleagues do stress tests on US the Credit default swaps (CDS) market. The paper uses a multi-agent simulator developed for this purpose. A demo version of the simulator is available on the above link as well.

Olli Castren (ECB) presented some novel work with Ilja Kavonius (ECB) modeling contagion across sectors of the economy using contingent claims analysis and flow of funds data. The paper “Balance sheet contagion and the transmission of risk in the euro area financial system” was recently published in the ECB Financial Stability Review. The presentation is also available.

NEW: These and other papers and presentations of the workshop are summarized in the ECB publication “Recent advances in modelling systemic risk using network analysis” (7 January 2010). See also the press release.