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.

An optimization model for minimizing systemic risk / Castellano, R.; Cerqueti, R.; Clemente, G. P.; Grassi, R.. - In: MATHEMATICS AND FINANCIAL ECONOMICS. - ISSN 1862-9679. - Online First:(2020), pp. 1-27. [10.1007/s11579-020-00279-6]

An optimization model for minimizing systemic risk

Castellano R.;Cerqueti R.;Clemente G. P.;
2020

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.
2020
Clustering coefficient; Complex networks; Credit default swaps; Mean absolute deviation; Optimization; Systemic risk
01 Pubblicazione su rivista::01a Articolo in rivista
An optimization model for minimizing systemic risk / Castellano, R.; Cerqueti, R.; Clemente, G. P.; Grassi, R.. - In: MATHEMATICS AND FINANCIAL ECONOMICS. - ISSN 1862-9679. - Online First:(2020), pp. 1-27. [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/11573/1460234
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