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PROJECT PAPER PUBLISHED

This project led to a successful publication, that can be found in the bellow link

https://doi.org/10.1016/j.pacfin.2019.101255

 SYSTEMIC RISK: VISUALIZING VULNERABILITY

Abstract

This paper develops a means of visualizing the vulnerability of complex systems of financial interactions around the globe using ANN techniques. We show how time-varying spillover indices can be translated into two dimensional crisis maps. The crisis maps have the advantage of showing the changing paths of vulnerability, including the direction and extent of the effect between source and affected markets. We demonstrate these crisis maps using equity  market data for 31 global markets over 1998-2017.  These tools help portfolio managers and policy makers to distinguish which of the the available tools for crisis management will be most appropriate for the form of vulnerability in play.

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CONTENTS

Filtered Networks with Static Spillovers

We show how Crisis is transmitted and received within a network of financial markets. We use filtered networks to focus out the highest crisis transmitters.

Conditional Spillovers

We show how vulnerability to crisis for a selected country may rise in response to changing systemic risks over two decades. 

We then severe individual connections between transmitters and receivers to examine if resilience for a vulnerable country increases or decreases with less connectivity.

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Crisis Maps

With self organizing maps, we propose an early warning system for crisis prediction. We concentrate out crisis transmission pathway within a predefined system.

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