TY  - JOUR
IS  - 36
JF  - Proceedings of the National Academy of Sciences
PB  - PNAS
EP  - 10036
ID  - eprints3552
N2  - Financial institutions form multilayer networks by engaging in contracts with each other and by holding exposures to common assets. As a result, the default probability of one institution depends on the default probability of all of the other institutions in the network. Here, we show how small errors on the knowledge of the network of contracts can lead to large errors in the probability of systemic defaults. From the point of view of financial regulators, our findings show that the complexity of financial networks may decrease the ability to mitigate systemic risk, and thus it may increase the social cost of financial crises.
SN  - 1091-6490
KW  - Financial contagion
KW  -  Financial networks
KW  -  Complexity
KW  -  Default probability
KW  -  Systemic risk
Y1  - 2016///
UR  - http://www.pnas.org/content/113/36/10031.abstract
A1  - Battiston, Stefano
A1  - Caldarelli, Guido
A1  - May, Robert M.
A1  - Roukny, Tarik
A1  - Stiglitz, Joseph E.
VL  - 113
TI  - The price of complexity in financial networks
SP  - 10031
AV  - public
N1  - SCOPUS ID: 2-s2.0-8498632199
ER  -