On Measuring and Evaluating Global Stability of Financial
Networks
Bhaskar DasGupta
University of Illinois at Chicago
Date and Location: Monday, April 22nd,
2013, 12:45pm - 1:45pm @ Stuart Building, Room 113.
Abstract
Threats on the stability of a financial system may severely affect
the functioning of the entire economy, and thus considerable
emphasis is placed on the analyzing the cause and effect of such
threats. The financial crisis in the current and past decade has
shown that one important cause of instability in global markets is
the so-called "financial contagion", namely the spreading of
instabilities or failures of individual components of the network to
other, perhaps healthier, components. This leads to a natural
question of whether the regulatory authorities could have predicted
and perhaps mitigated the current economic crisis by effective
computations of some stability measure of the banking networks.
Motivated by such observations, we consider the problem of defining
and evaluating stabilities of both homogeneous and heterogeneous
banking networks against propagation of synchronous idiosyncratic
shocks given to a subset of banks. We formalize the homogeneous
banking network model of Nier et al. and its corresponding
heterogeneous version, formalize the synchronous shock propagation
procedures, define two appropriate stability measures and
investigate the computational complexities of evaluating these
measures for various network topologies and parameters of interest.
Our results and proofs also shed some light on the properties of
topologies and parameters of the network that may lead to higher or
lower stabilities. Time permitting, we will also discuss our
comprehensive empirical evaluation of this stability measure over
more than 700,000 combinations of networks types and parameter
combinations that leads to discovering many interesting implications
of our evaluations on the stability measures, and deriving
topological properties and parameters combinations that may be used
to flag the network as a possible fragile network.
Biography
Bhaskar DasGupta is currently an associate professor in the Computer
Science Department at University of Illinois at Chicago. His
specific research interests include designing and implementing
efficient computational methods for computationally hard problems in
application areas such as bioinformatics, systems biology and hybrid
systems. Outside biology, his broader research interests in computer
science include designing efficient algorithms for computationally
hard problems in diverse areas such as computational geometry,
parallel computing, optical networks and combinatorial auctions.
DasGupta is a senior member of IEEE and has published about 100
research papers. His research works have been supported by numerous
NSF grants, including an NSF CAREER award. DasGupta currently serves
on the editorial boards of the journals IEEE Transactions on Neural
Networks, Advances in Bioinformatics, Theoretical Biology Insights,
International Journal of Data Mining and Bioinformatics,
International Journal of Information Sciences, and Computer
Engineering and Discrete Mathematics, Algorithms and Applications