Author: Stefan Thurner
Systemic risk in financial markets arises either through synchronized behaviour of agents, or because of the interconnectedness of agents through financial contracts. We show that the systemic risk level of every agent in the system can be quantified by simple network measures. With actual central bank data for Austria and Mexico we are able to compute the expected systemic loss for an economy, a number that allows to estimate the cost of a financial crises. We can further show with real data that it is possible to compute the systemic risk contribution of every single financial transaction. We suggest a simple financial insurance scheme that effectively punishes the systemic risk contribution of all transactions. This scheme provides an incentive for market participants to trade financial assets in a way that effectively restructures financial networks so that contagion events become impossible. With an agent based model we can demonstrate that this systemic risk reducing policy practically eliminates systemic risk in a system.
Stefan Thurner is full professor for Science of Complex Systems at the Medical University of Vienna, where he chairs Section for Science of Complex Systems. Since 2007 he is external professor at the Santa Fe Institute, since 2010 he is a part-time senior researcher at IIASA.
He obtained a PhD in theoretical physics from the Technical University of Vienna in 1995, and a PhD in economics from the University of Vienna in 2001. He held postdoc positions at Humboldt Universität zu Berlin and Boston University before he joined the faculty of the University of Vienna in 1999 and later Medical University. He obtained his habilitation in theoretical physics in 2001. With his engagement with the Santa Fe Institute – he shifted his focus from theoretical physics to biological and complex systems, which are now his main scientific areas.
Since 1995 Thurner has published more than 170 scientific articles in fundamental physics, applied mathematics, complex systems, life sciences, bioinformatics, economics and lately in social sciences. He holds 2 patents.