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CATEGORIES:Isaac Newton Institute Seminar Series
SUMMARY:Random Financial Networks and Locally Treelike Ind
ependence - Hurd\, TR (McMaster University)
DTSTART;TZID=Europe/London:20140827T094500
DTEND;TZID=Europe/London:20140827T101500
UID:TALK53892AThttp://talks.cam.ac.uk
URL:http://talks.cam.ac.uk/talk/index/53892
DESCRIPTION:Exact results in percolation theory on random grap
hs rely on a property known as the "tree ansatz''\
, which is known to be asymptotically true on the
family on configuration graphs. More generally\, t
he tree ansatz\, also called mean field theory\, c
an be used as the basis of approximations\, which
as numerous authors have remarked\, can be surpris
ingly accurate. The question arises whether the tr
ee ansatz can be useful for understanding financia
l systemic risk. In this talk\, I will review the
concepts underlying the tree ansatz\, and explore
how it can be embedded and used in models of finan
cial contagion\, such as the Eisenberg-Noe model a
nd its alternatives. Along the way\, I will propos
e definitions for "random financial network'' (RFN
) and "locally treelike independence'' (LTI)\, and
explore these definitions' mathematical consequen
ces. In the end I will compare analytical approxim
ations to Monte Carlo computations in some realist
ic network cascade examples\, and show that there
are indeed situations where the LTI approximation
is "surprisingly" accurate. This provides some evi
dence that understanding of networks in other doma
ins can help us in understanding financial network
s. \n
LOCATION:Seminar Room 1\, Newton Institute
CONTACT:Mustapha Amrani
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