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dc.contributor.author
Sieczka, Pawel
dc.contributor.author
Sornette, Didier
dc.contributor.author
Hołyst, Janusz A.
dc.date.accessioned
2020-09-28T08:53:42Z
dc.date.available
2017-06-09T09:02:53Z
dc.date.available
2020-09-28T08:53:42Z
dc.date.issued
2010-02-04
dc.identifier.uri
http://hdl.handle.net/20.500.11850/29190
dc.description.abstract
Inspired by the bankruptcy of Lehman Brothers and its consequences on the global financial system, we develop a simple model in which the Lehman default event is quantified as having an almost immediate effect in worsening the credit worthiness of all financial institutions in the economic network. In our stylized description, all properties of a given firm are captured by its effective credit rating, which follows a simple dynamics of co-evolution with the credit ratings of the other firms in our economic network. The existence of a global phase transition explains the large susceptibility of the system to negative shocks. We show that bailing out the first few defaulting firms does not solve the problem, but does have the effect of alleviating considerably the global shock, as measured by the fraction of firms that are not defaulting as a consequence. This beneficial effect is the counterpart of the large vulnerability of the system of coupled firms, which are both the direct consequences of the collective self-organized endogenous behaviors of the credit ratings of the firms in our economic network.
en_US
dc.language.iso
en
en_US
dc.publisher
Cornell University
en_US
dc.subject
Economics
en_US
dc.subject
Econophysics
en_US
dc.subject
Financial markets
en_US
dc.subject
Business and management
en_US
dc.title
The Lehman Brothers Effect and Bankruptcy Cascades
en_US
dc.type
Working Paper
ethz.journal.title
arXiv
ethz.pages.start
1002.1070
en_US
ethz.size
13 p.
en_US
ethz.identifier.arxiv
1002.1070
ethz.publication.place
Ithaca, NY
en_US
ethz.publication.status
published
en_US
ethz.leitzahl
ETH Zürich::00002 - ETH Zürich::00012 - Lehre und Forschung::00007 - Departemente::02120 - Dep. Management, Technologie und Ökon. / Dep. of Management, Technology, and Ec.::03738 - Sornette, Didier (emeritus) / Sornette, Didier (emeritus)
en_US
ethz.leitzahl.certified
ETH Zürich::00002 - ETH Zürich::00012 - Lehre und Forschung::00007 - Departemente::02120 - Dep. Management, Technologie und Ökon. / Dep. of Management, Technology, and Ec.::03738 - Sornette, Didier (emeritus) / Sornette, Didier (emeritus)
ethz.relation.isPreviousVersionOf
20.500.11850/44003
ethz.date.deposited
2017-06-09T09:03:05Z
ethz.source
ECIT
ethz.identifier.importid
imp59364d95ef25069596
ethz.ecitpid
pub:48578
ethz.eth
yes
en_US
ethz.availability
Metadata only
en_US
ethz.rosetta.installDate
2017-07-18T08:42:52Z
ethz.rosetta.lastUpdated
2023-02-06T20:29:06Z
ethz.rosetta.versionExported
true
ethz.COinS
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