Mitigating cascades in sandpile models: an immunization strategy for systemic risk?
1 ISC-CNR UoS “Sapienza”, Piazzale Moro 5, 00185 Roma, Italy
2 London Institute of Mathematical Sciences, 22 South Audley St Mayfair London W1K 2NY, UK
3 IMT Lucca Institute for Advanced Studies, Piazza S. Ponziano 6, Lucca, 55100, Italy
4 Theoretical Physics Division, Rudjer Bošković Institute, P.O.Box 180, HR-10002 Zagreb, Croatia
5 ENEA, CR “Casaccia”, Via Anguillarese 301 00123, Roma, Italy
a e-mail: firstname.lastname@example.org
Received: 2 January 2016
Revised: 14 March 2016
Published online: 26 October 2016
We use a simple model of distress propagation (the sandpile model) to show how financial systems are naturally subject to the risk of systemic failures. Taking into account possible network structures among financial institutions, we investigate if simple policies can limit financial distress propagation to avoid system-wide crises, i.e. to dampen systemic risk. We therefore compare different immunization policies (i.e. targeted helps to financial institutions) and find that the information coming from the network topology allows to mitigate systemic cascades by targeting just few institutions.
© EDP Sciences, Springer-Verlag, 2016