Abstract: We applied mathematical modeling in order to understand the behavior of the banking system as a network infrastructure. Based on graph modeling, we developed program modules for simulating the propagation of a financial shock over a system of interconnected banks. The simulation imitates a wave of contagion of the banking system, which is generated as a random graph. In order to analyze the behavior of the system in general, we perform a multiple generation of random graphs and consider the obtained mean values. We analyze the influence of a set of input economic parameters with regards of the properties of the banking system as a “critical infrastructure”. We used different subordination models of the graph structure, with regards of contemporary financial theories and taking into account recent documents of the European financial commissions. The results of the simulations permit to do important recommendations concerning the methods for protecting and optimizing the banking system.

ACM Classification Keywords: I.6.5: Model Development, I.6.6: Simulation Output Analysis. G.2.2 Graph Theory, G.2.3 Applications

Link:

A GRAPH MODEL OF SHOCKED FINANCIAL SYSTEM

Velina Slavova, Lyubomir Mirchev, Hristian Elefteridis

http://foibg.com/ibs_isc/ibs-19/ibs-19-p34.pdf