Involvements of major financial institutions in the recent financial crisis have generated renewed interests in fragility of global financial networks among economists and regulatory authorities. In particular, one potential vulnerability of the financial networks is the "financial contagion" process in which insolvencies of individual entities propagate through the "web of dependencies" to affect the entire system. In this paper, we formalize a banking network model originally proposed by researchers from Bank of England and elsewhere that may be applicable to scenarios such as the OTC derivatives market, define a  global stability measure for this model, and comprehensively evaluate the stability measure over more than 700,000 combinations of networks types and parameter combinations. Based on such comprehensive evaluations, we discuss some interesting implications of our evaluations of this stability measure, and derive topological properties and parameters combinations that may be used to flag the network as a possible fragile network.
The recent financial crisis have generated renewed interests in fragilities of global financial networks among economists and regulatory authorities. In particular, a potential vulnerability of the financial networks is the "financial contagion" process in which insolvencies of individual entities propagate through the "web of dependencies" to affect the entire system. In this paper, we formalize an extension of a financial network model originally proposed by Nier et al. for scenarios such as the OTC derivatives market, define a suitable global stability measure for this model, and perform a comprehensive empirical evaluation of this stability measure over more than 700,000 combinations of networks types and parameter combinations. Based on our evaluations, we discover many interesting implications of our evaluations of this stability measure, and derive topological properties and parameters combinations that may be used to flag the network as a possible fragile network.
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