Prediction of Systemic Risk Contagion Based on a Dynamic Complex Network Model Using Machine Learning Algorithm
It is well known that the interbank market is able to effectively provide financial liquidity for the entire banking system and maintain the stability of the financial market. In this paper, we develop an innovative complex network approach to simulate an interbank network with systemic risk contagi...
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| Format: | Article |
| Language: | English |
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Wiley
2020-01-01
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| Series: | Complexity |
| Online Access: | http://dx.doi.org/10.1155/2020/6035372 |
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| _version_ | 1832553465680756736 |
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| author | Jiannan Yu Jinlou Zhao |
| author_facet | Jiannan Yu Jinlou Zhao |
| author_sort | Jiannan Yu |
| collection | DOAJ |
| description | It is well known that the interbank market is able to effectively provide financial liquidity for the entire banking system and maintain the stability of the financial market. In this paper, we develop an innovative complex network approach to simulate an interbank network with systemic risk contagion that takes into account the balance sheet of each bank, from which we can identify if the financial institutions have sufficient capital reserves to prevent risk contagion. Cascading defaults are also generated in the simulation according to different crisis-triggering (targeted defaults) methods. We also use machine learning techniques to identify the synthetic features of the network. Our analysis shows that the topological factors and market factors in the interbank network have significant impacts on the risk spreading. Overall, this paper provides a scientific method for policy-makers to select the optimal management policy for handling systemic risk. |
| format | Article |
| id | doaj-art-597a544ade3647c691584b45a5cdf7ed |
| institution | Kabale University |
| issn | 1076-2787 1099-0526 |
| language | English |
| publishDate | 2020-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Complexity |
| spelling | doaj-art-597a544ade3647c691584b45a5cdf7ed2025-02-03T05:53:56ZengWileyComplexity1076-27871099-05262020-01-01202010.1155/2020/60353726035372Prediction of Systemic Risk Contagion Based on a Dynamic Complex Network Model Using Machine Learning AlgorithmJiannan Yu0Jinlou Zhao1School of Economics and Management, Harbin Engineering University, Harbin, Heilongjiang 150001, ChinaSchool of Economics and Management, Harbin Engineering University, Harbin, Heilongjiang 150001, ChinaIt is well known that the interbank market is able to effectively provide financial liquidity for the entire banking system and maintain the stability of the financial market. In this paper, we develop an innovative complex network approach to simulate an interbank network with systemic risk contagion that takes into account the balance sheet of each bank, from which we can identify if the financial institutions have sufficient capital reserves to prevent risk contagion. Cascading defaults are also generated in the simulation according to different crisis-triggering (targeted defaults) methods. We also use machine learning techniques to identify the synthetic features of the network. Our analysis shows that the topological factors and market factors in the interbank network have significant impacts on the risk spreading. Overall, this paper provides a scientific method for policy-makers to select the optimal management policy for handling systemic risk.http://dx.doi.org/10.1155/2020/6035372 |
| spellingShingle | Jiannan Yu Jinlou Zhao Prediction of Systemic Risk Contagion Based on a Dynamic Complex Network Model Using Machine Learning Algorithm Complexity |
| title | Prediction of Systemic Risk Contagion Based on a Dynamic Complex Network Model Using Machine Learning Algorithm |
| title_full | Prediction of Systemic Risk Contagion Based on a Dynamic Complex Network Model Using Machine Learning Algorithm |
| title_fullStr | Prediction of Systemic Risk Contagion Based on a Dynamic Complex Network Model Using Machine Learning Algorithm |
| title_full_unstemmed | Prediction of Systemic Risk Contagion Based on a Dynamic Complex Network Model Using Machine Learning Algorithm |
| title_short | Prediction of Systemic Risk Contagion Based on a Dynamic Complex Network Model Using Machine Learning Algorithm |
| title_sort | prediction of systemic risk contagion based on a dynamic complex network model using machine learning algorithm |
| url | http://dx.doi.org/10.1155/2020/6035372 |
| work_keys_str_mv | AT jiannanyu predictionofsystemicriskcontagionbasedonadynamiccomplexnetworkmodelusingmachinelearningalgorithm AT jinlouzhao predictionofsystemicriskcontagionbasedonadynamiccomplexnetworkmodelusingmachinelearningalgorithm |