Modeling financial distress propagation on customer-supplier networks.

Financial networks have been the object of intense quantitative analysis during the last few decades. Their structure and the dynamical processes on top of them are of utmost importance to understand the emergent collective behavior behind economic and financial crises. In this paper, we propose a stylized model to understand the "domino effect" of distress in client-supplier networks. We provide a theoretical analysis of the model, and we apply it to several synthetic networks and a real customer-supplier network, supplied by one of the largest banks in Europe. Besides, the proposed model allows us to investigate possible scenarios for the functioning of the financial distress propagation and to assess the economic health of the full network. The main novelty of this model is the combination of two stochastic terms: an additive noise, accounting by the capability of trading and paying obligations, and a multiplicative noise representing the variations of the market. Both parameters are crucial to determining the maximum default probability and the diffusion process characteristics.

Systemic delay propagation in the US airport network.

Technologically driven transport systems are characterized by a networked structure connecting operation centers and by a dynamics ruled by pre-established schedules. Schedules impose serious constraints on the timing of the operations, condition the allocation of resources and define a baseline to assess system performance. Here we study the performance of an air transportation system in terms of delays. Technical, operational or meteorological issues affecting some flights give rise to primary delays. When operations continue, such delays can propagate, magnify and eventually involve a significant part of the network. We define metrics able to quantify the level of network congestion and introduce a model that reproduces the delay propagation patterns observed in the U.S. performance data. Our results indicate that there is a non-negligible risk of systemic instability even under normal operating conditions. We also identify passenger and crew connectivity as the most relevant internal factor contributing to delay spreading.