Coast to Coast Seminar Series: "A Framework for Modeling Network Risk"

Tuesday, March 29, 2011
11:30 - 12:30

Dr. Ramazan Gencay and Daniele Signori
Department of Economics, SFU


The complexity of the financial system is increasing at an accelerating pace. This evolution is driven not only by technology but also by business practices. For example, as risk managers reach out for different exposures in the pursuit of diversification, the financial network becomes more tangled. The ensuing uncertainty has been indicated as one of the causes that aggravated the global financial crises.

In this talk, we will cover some recent results on the econometrics of networks and describe an empirical framework for quantifying network risk. These tools can be used to analyze liquidity in a decentralized market, to understand the trade off between diversification gains and increased network complexity, and to evaluate policies that can mitigate the uncertainty faced by the market participants about the network structure.