Contagion in random graphs and systemic risk

Combinatorics Seminar
Friday, February 15, 2019 - 3:00pm
1 hour (actually 50 minutes)
Skiles 005
Georgia State University
We provide a framework for testing the possibility of large cascades in random networks. Our results extend previous studies on contagion in random graphs to inhomogeneous directed graphs with a given degree sequence and arbitrary distribution of weights. This allows us to study systemic risk in financial networks, where we introduce a criterion for the resilience of a large network to the failure (insolvency) of a small group of institutions and quantify how contagion amplifies small shocks to the network.