This paper proposes an optimal allocation model with the main aim to minimize systemic risk related to the sovereign risk of a set of countries. The reference methodological environment is that of complex networks theory. Specifically, we consider the weighted clustering coefficient as a proxy of systemic risk, while the interconnections among countries are captured by the relationships among default probabilities of the set of countries under consideration. The selected optimization criterion is based on minimization of the mean absolute deviation. We perform empirical analyses to validate the theoretical predictions, and interpret the findings in the context of the proposed model.

Castellano, R., Cerqueti, R., Clemente, G., Grassi, R. (2021). An optimization model for minimizing systemic risk. MATHEMATICS AND FINANCIAL ECONOMICS, 15(1), 103-129 [10.1007/s11579-020-00279-6].

An optimization model for minimizing systemic risk

Grassi, Rosanna
2021

Abstract

This paper proposes an optimal allocation model with the main aim to minimize systemic risk related to the sovereign risk of a set of countries. The reference methodological environment is that of complex networks theory. Specifically, we consider the weighted clustering coefficient as a proxy of systemic risk, while the interconnections among countries are captured by the relationships among default probabilities of the set of countries under consideration. The selected optimization criterion is based on minimization of the mean absolute deviation. We perform empirical analyses to validate the theoretical predictions, and interpret the findings in the context of the proposed model.
Articolo in rivista - Articolo scientifico
Clustering coefficient; Complex networks; Credit default swaps; Mean absolute deviation; Optimization; Systemic risk;
English
12-set-2020
2021
15
1
103
129
none
Castellano, R., Cerqueti, R., Clemente, G., Grassi, R. (2021). An optimization model for minimizing systemic risk. MATHEMATICS AND FINANCIAL ECONOMICS, 15(1), 103-129 [10.1007/s11579-020-00279-6].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/284852
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