Recent results on systemic risk in large financial networks & more by Dr. Konstantinos Spiliopoulos

Event Date: 

Monday, January 9, 2012 - 3:30pm to 5:00pm

Event Date Details: 

Refreshments served at 3:15 PM

Event Location: 

  • South Hall 5607F

Dr. Konstantinos Spiliopoulos (Brown University)

Title: Recent results on systemic risk in large financial networks & more

Abstract: The past several years have made clear the need to better understand the behavior of risk in large interconnected financial networks. Interconnections often make a system robust, but they can act as conduits for risk. In this talk, I will present recent results on modeling the dynamics of correlated default events in the financial market. An empirically motivated system of interacting point processes is introduced and we study how different types of risk, like contagion and exposure to systematic risk, compete and interact in large-scale systems. A law of large numbers for the loss from default is proven and used for approximating the distribution of the loss from default in large, potentially heterogenous portfolios. Large deviation arguments are then used to identify the way that atypically large (i.e. ``rare'') default clusters are most likely to occur. The results give insights into how different sources of default correlation interact to generate typical and atypical portfolio losses.

Time permitting, I will discuss briefly recent general results on large deviations and Monte-Carlo methods for multiple scale systems. Questions of interest include qualitative and quantitative descrpition of transitions probabilities between different equilibrium states of a given system. The results can potentially have applications in scientific disciplines such as chemistry and are also related to certain stochastic volatility models.