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Annual Review of Economics

Volume 13, 2021

Systemic Risk in Financial Networks: A Survey

Abstract

We provide an overview of the relationship between financial networks and systemic risk. We present a taxonomy of different types of systemic risk, differentiating between direct externalities between financial organizations (e.g., defaults, correlated portfolios, fire sales), and perceptions and feedback effects (e.g., bank runs, credit freezes). We also discuss optimal regulation and bailouts, measurements of systemic risk and financial centrality, choices by banks regarding their portfolios and partnerships, and the changing nature of financial networks.

Keyword(s): bank runs, banks, compression, correlated portfolios, credit freeze, default risk, financial bubbles, financial crises, financial networks, JEL D85, JEL F15, JEL F34, JEL F36, JEL F65, JEL G15, JEL G32, JEL G33, JEL G38, markets, networks, shadow banking, supply chains, systemic risk
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2021-08-05
2024-04-24
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Systemic Risk in Financial Networks: A Survey
Annual Review of Economics 13, 171 (2021); https://doi.org/10.1146/annurev-economics-083120-111540
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