Systemic risk and liquidity rescue in complex financial network: A study based on different topologies

Yi He, Mu Tong, Shan Wu, Shikun Shang

Research output: Contribution to journalArticlepeer-review

6 Citations (Scopus)

Abstract

Using the payment settlement network as an example and constructing the liquidity circulation model in a complex network, the systemic risk and liquidity rescue under different network topologies and different risk scenarios are studied. The results are as follows:1) The network topology has a significant impact on the stability of the system, and the system shows the characteristics of "stable but fragile", which means that the smaller the differences between nodes and the closer the connections, the smaller the probability of systematic risk and the more serious the consequence when the risk is formed. 2) Because the degree of systemic risk is positively correlated with the system's liquidity gap, the rescue strategy based on using the nodes' liquidity gaps to allocate the rescue fund is not inferior to other strategies. Under different network topologies, the degree of differences between strategies is significantly different. 3) Under the strategy based on the node's liquidity gaps, the order of rescue also matters under different network topology. But the impact is significant only when there are large differences between the network nodes and with medium rescue scale.

Original languageEnglish
Pages (from-to)1385-1393
Number of pages9
JournalXitong Gongcheng Lilun yu Shijian/System Engineering Theory and Practice
Volume39
Issue number6
DOIs
Publication statusPublished - 1 Jun 2019
Externally publishedYes

Keywords

  • Liquidity rescue
  • Network topology
  • Payment system
  • Systemic risk

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