Mapping systemic risk: critical degree and failures distribution in financial networks

The 2008 financial crisis illustrated the need for a thorough, functional understanding of systemic risk in strongly interconnected financial structures. Dynamic processes on complex networks being intrinsically difficult, most recent studies of this problem have relied on numerical simulations. Here we report analytical results in a network model of interbank lending based on directly relevant financial parameters, such as interest rates and leverage ratios. Using a mean-field approach, we obtain a closed-form formula for the "critical degree", viz. the number of creditors per bank below which an individual shock can propagate throughout the network. We relate the failures distribution (probability that a single shock induces $F$ failures) to the degree distribution (probability that a bank has $k$ creditors), showing in particular that the former is fat-tailed whenever the latter is. Our criterion for the onset of contagion turns out to be isomorphic to the condition for cooperation to evolve on graphs and social networks, as recently formulated in evolutionary game theory. This remarkable connection supports recent calls for a methodological rapprochement between finance and ecology.Comment: 19 pages, 4 figure

Understanding the Effect that Task Complexity has on Automation Potential and Opacity: Implications for Algorithmic Fairness

Scholars have increasingly focused on understanding different aspects of algorithms since they not only affect individual choices and decisions but also influence and shape societal structures. We can broadly categorize scholarly work on algorithms along the dimensions of economic gain that one achieves through automation and the ethical concerns that stem from such automation. However, the literature largely uses the notion of algorithms in a generic way and overlooks different algorithms’ specificity and the type of tasks that they perform. Drawing on a typology of tasks based on task complexity, we suggest that variations in the complexity of tasks contribute to differences in 1) their automation potential and 2) the opacity that results from their automation. We also suggest a framework to assess the likelihood that fairness concerns will emanate from automation of tasks with varying complexity. In this framework, we also recommend affordances for addressing fairness concerns that one may design into systems that automate different types of tasks

A Simple Statistical Model for Analysis of QGP-droplet (Fireball) Formation

We construct the density of states for quarks and gluons using the `Thomas - Fermi model' for atoms and the `Bethe model' for nucleons as templates. With parameters to take care of the plasma (hydrodynamical) features of the QGP with a thermal potential for the interaction, we find a window in the parametric space of the model where observable QGP droplets of $\sim$ 5 fm radius can occur with transition temperature in the range 140 MeV to 250 MeV. By matching with the expectations of Lattice Gauge estimates of the QGP-hadron transitions, we can further narrow the window, thereby restricting the allowed values of the flow-parameters of the model.Comment: LaTex 11 pages, 8 figure

Critical connectivity in banking networks

The financial crisis of 2007-2009 demonstrated the need to understand the macrodynamics of interconnected financial systems. A fruitful approach to this problem regards financial infrastructures as weighted directed networks, with banks as nodes and loans as links. Using a simple banking model in which banks are linked through interbank lending, with an exogenous shock applied to a single bank, we find a closedform analytical solution for the degree at which failures begin to propagate in the network. This critical degree is expressed as a function of four financial parameters: banking leverage; interbank exposure; return on the investment opportunity; and interbank lending rate. While the transition to failure propagation is sharpest with regular networks, we observe it numerically for random and scale-free networks as well. We find that, if the expected number of failures is not strongly dependent on the network topology and is well captured by the notion of critical degree, the frequency of catastrophic cascades (with a single shock inducing all or most banks in the network to fail) tends to be much larger on scale-free networks than on classical random networks. We interpret this finding as a manifestation of the “robust-yet-fragile” property of scale-free networks

Prevention of heart failure events with sodium-glucose co-transporter 2 inhibitors across a spectrum of cardio-renal-metabolic risk

Aims Trials have tested the safety and efficacy of sodium-glucose co-transporter 2 inhibitors (SGLT2i) across various disease states. We performed a meta-analysis of randomized controlled trials (RCTs) to estimate the relative and absolute effects of SGLT2i in the prevention of heart failure (HF) events across different risk groups. Methods and results We conducted a systematic review and meta-analysis of large, placebo-controlled RCTs with >1000 participants evaluating HF hospitalization and the composite of cardiovascular (CV) death or HF hospitalization. Due to varying durations of therapeutic exposure and follow-up, absolute risk reductions and number needed to treat were calculated based on incidence rates (per 100 patient-years). Across 71 553 patients enrolled in 10 late-phase RCTs, SGLT2i reduced the risk of HF hospitalization by 31% [hazard ratio (HR) 0.69, 95% confidence interval (CI) 0.64-0.74; I-2 = 0%] and the composite outcome of CV death or HF hospitalization by 24% (HR 0.76, 95% CI 0.72-0.80; I-2 = 1.4%) compared with placebo. The number of patient-years of treatment exposure needed to prevent one CV death or HF hospitalization ranged from 19-26 (established HF) to 72-125 (chronic kidney disease) to 96-400 (high-risk type 2 diabetes). In mixed-effects meta-regression analyses, the benefits of SGLT2i on HF hospitalizations or the composite outcome (CV death or HF hospitalization) were not influenced by age, sex, or change in intermediate markers (glycated haemoglobin, systolic blood pressure, and body weight) (all P >= 0.10). Conclusion Despite wide variation in baseline risks and disease states evaluated, SGLT2i demonstrated comparable relative risk reductions in preventing HF events. Patients at highest baseline risk derived the greatest absolute benefits in preventing HF events. These composite estimates may help guide targeted implementation of SGLT2i for the prevention of HF events in type 2 diabetes and chronic kidney disease and in the treatment of HF

Transient current spectroscopy of a quantum dot in the Coulomb blockade regime

Transient current spectroscopy is proposed and demonstrated in order to investigate the energy relaxation inside a quantum dot in the Coulomb blockade regime. We employ a fast pulse signal to excite an AlGaAs/GaAs quantum dot to an excited state, and analyze the non-equilibrium transient current as a function of the pulse length. The amplitude and time-constant of the transient current are sensitive to the ground and excited spin states. We find that the spin relaxation time is longer than, at least, a few microsecond.Comment: 5 pages, 3 figure