On the influence of network structure on the resilience and losses of financial systems

We investigate resilience to defaults in financial networks, where nodes hold shares in a common set of external assets. Price fluctuations in these assets can trigger shareholder defaults, propagating through the network and causing default cascades. In particular, we conduct a series of numerical experiments to elucidate the influence of the network structure on the financial system. Our investigation explores the effects of sparsity versus connectivity, clustering, and liability heterogeneity among financial institutions. We also examine the impact of diversification and asset investment heterogeneity.