An optimization model for minimizing systemic risk

Gian Paolo Clemente, Roy Cerqueti, Rosella Castellano, Rosanna Grassi

Risultato della ricerca: Contributo in rivistaArticolo in rivista

1 Citazioni (Scopus)

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.
Lingua originaleEnglish
pagine (da-a)N/A-N/A
RivistaMathematics and Financial Economics
DOI
Stato di pubblicazionePubblicato - 2020

Keywords

  • Clustering coefficient
  • Complex networks
  • Credit default swaps
  • Mean absolute deviation
  • Optimization
  • Systemic risk

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