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Cascading Failures And Fundamental Uncertainty: Divergence In Financial Risk Assessment, Alexander Kent Spray
Cascading Failures And Fundamental Uncertainty: Divergence In Financial Risk Assessment, Alexander Kent Spray
Electronic Theses and Dissertations
By applying common financial risk assessment models to the network economy formalized in Delli Gatti et al. (2006), and by contextualizing both in the broader literature on complexity in economic systems, the question of convergence in economic models is addressed. Critically, a formal state condition is identified which can contribute to the emergence of periods of extreme divergence from expected conditions even in a model characterized by restrictive assumptions regarding agent choice and market structure. The strength of the impact of this state condition, here the topology of a credit network, on the dynamics of the economic system is furthermore …