Pengbin Feng Releases v5 of Research Paper on Dynamic Threshold Dilemma Contagion Low-Rank Graph Limits
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Pengbin Feng released v5 of a research paper focused on low-rank and graph-theoretic limits of dynamic threshold distress contagion in heterogeneous financial networks. The study addresses directed networks where institutions can recover and re-enter distress, investigating the propagation mechanisms of financial distress. The study proves that network dynamics with K sender-receiver factor pairs can be exactly represented by a closed system of K feedback equations. Numerical experiments based on sovereign portfolios disclosed by 116 banks show that, under the baseline scenario, retaining the two most heavily shocked channels results in a maximum buffer path error approximately one-fifteenth of that of the twelve-mode singular value truncation method.
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- arXiv q-finLow-Rank and Graph-Theoretic Limits of Dynamic Threshold Distress Contagion in Heterogeneous Financial Networks
This study focuses on the propagation of financial distress in directed networks where institutions can recover and re-enter distress, proving that network dynamics with K sender-receiver factor pairs can be exactly represented by a closed system of K feedback equations. Numerical experiments based on sovereign portfolios disclosed by 116 banks show that under the baseline scenario, retaining the two most heavily shocked channels yields a maximum buffer path error approximately one-fifteenth of that from a twelve-mode singular value truncation method.
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