The European Physical Journal Special Topics

, Volume 225, Issue 10, pp 2017–2023 | Cite as

Mitigating cascades in sandpile models: an immunization strategy for systemic risk?

  • Antonio Scala
  • Vinko Zlatić
  • Guido Caldarelli
  • Gregorio D’Agostino
Regular Article Network Economics
Part of the following topical collections:
  1. Complex, Inter-networked Economic and Social Systems

Abstract

We use a simple model of distress propagation (the sandpile model) to show how financial systems are naturally subject to the risk of systemic failures. Taking into account possible network structures among financial institutions, we investigate if simple policies can limit financial distress propagation to avoid system-wide crises, i.e. to dampen systemic risk. We therefore compare different immunization policies (i.e. targeted helps to financial institutions) and find that the information coming from the network topology allows to mitigate systemic cascades by targeting just few institutions.

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Copyright information

© EDP Sciences and Springer 2016

Authors and Affiliations

  • Antonio Scala
    • 1
    • 2
    • 3
  • Vinko Zlatić
    • 4
  • Guido Caldarelli
    • 1
    • 2
    • 3
  • Gregorio D’Agostino
    • 2
    • 5
  1. 1.ISC-CNR UoS “Sapienza”RomaItaly
  2. 2.London Institute of Mathematical SciencesLondonUK
  3. 3.IMT Lucca Institute for Advanced StudiesLuccaItaly
  4. 4.Theoretical Physics Division, Rudjer Bošković InstituteZagrebCroatia
  5. 5.ENEA, CR “Casaccia”RomaItaly

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