Financial networks resilience and shocks propagation

In the context of network modelling and analysis, especially as it relates to finance, the idea of resilience—i.e., the capacity of a cohesive system to absorb shocks—is highly relevant. This paper starts from this premise, and deals with a general definition of resilience measure. Moreover, we apply our methodological proposal to the resilience of a financial interbanking system. To achieve this, we build a financial network model related to the quarterly-based interbanking sector, whose weights are calibrated on high quality empirical data; next, we compute the resilience measure of the considered networks, taking into full consideration the influence of the network topology and the weights of its links in the shocks propagation. We show that our proposal is a generalization of other resilience measures. The findings are discussed in light of both the financial and network theory perspectives.