A framework for analyzing contagion in assortative banking networks
Bibliographic record
Abstract
We introduce a probabilistic framework that represents stylized banking networks with the aim of predicting the size of contagion events. Most previous work on random financial networks assumes independent connections between banks, whereas our framework explicitly allows for (dis)assortative edge probabilities (i.e., a tendency for small banks to link to large banks). We analyze default cascades triggered by shocking the network and find that the cascade can be understood as an explicit iterated mapping on a set of edge probabilities that converges to a fixed point. We derive a cascade condition, analogous to the basic reproduction number R0 in epidemic modelling, that characterizes whether or not a single initially defaulted bank can trigger a cascade that extends to a finite fraction of the infinite network. This cascade condition is an easily computed measure of the systemic risk inherent in a given banking network topology. We use percolation theory for random networks to derive a formula for the frequency of global cascades. These analytical results are shown to provide limited quantitative agreement with Monte Carlo simulation studies of finite-sized networks. We show that edge-assortativity, the propensity of nodes to connect to similar nodes, can have a strong effect on the level of systemic risk as measured by the cascade condition. However, the effect of assortativity on systemic risk is subtle, and we propose a simple graph theoretic quantity, which we call the graph-assortativity coefficient, that can be used to assess systemic risk.
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.002 | 0.010 |
| Meta-epidemiology (narrow) | 0.001 | 0.001 |
| Meta-epidemiology (broad) | 0.001 | 0.001 |
| Bibliometrics | 0.003 | 0.002 |
| Science and technology studies | 0.001 | 0.002 |
| Scholarly communication | 0.002 | 0.004 |
| Open science | 0.002 | 0.001 |
| Research integrity | 0.002 | 0.002 |
| Insufficient payload (model declined to judge) | 0.003 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".