학술논문
A Stochastic Model for Cascading Failures in Financial Networks
Document Type
Periodical
Author
Source
IEEE Transactions on Control of Network Systems IEEE Trans. Control Netw. Syst. Control of Network Systems, IEEE Transactions on. 10(4):1950-1961 Dec, 2023
Subject
Language
ISSN
2325-5870
2372-2533
2372-2533
Abstract
In this article, we study cascading failures in time-varying and uncertain financial networks. First, we develop a stochastic dynamic model for the mean and covariance matrix of the market value of each company in the network. Second, we provide a steady-state analysis, we characterize equilibrium points, and we provide conditions for the asymptotic stability of such points. For the covariance matrix, the dynamics have the form of a Lyapunov equation and simulating such dynamics can be viewed as a numerical method to compute the steady-state solution. As a general insight, the dynamics reveal the probability of failure of each company during the transient and at steady state. Finally, we perform a robust analysis to obtain bounding sets for the mean market value in the absence of information on the covariance.