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Towards Unified Perron-Frobenius Framework for Managing Systemic Risk in Networked Systems

Published

Author(s)

Vladimir V. Marbukh

Abstract

Along with economic and convenience benefits, interconnectivity also brings potential risks and drawbacks. System designers and operators are faced with problem of balancing the relevant systemic risk/benefit tradeoffs. Assuming that system components are exposed to local risk of overload, overstress, etc., this paper quantifies and investigates the effects of local risk sharing among different system components. The positive effect is due to a mitigation of the local risks, and the negative effect is due to potential risk exposure cas-cades. While systemic risk of undesirable cascades can be naturally defined at the micro-level, the inherently macroscopic nature of systemic risk suggests the possibility of a macro-level description. We propose a Per-ron-Frobenius based macro-description of systemic risk. We argue that systemic risk of abrupt/discontinuous instabilities should be of higher concern for networked system designers and operators than systemic risk of gradual/continuous instabilities. We also discuss an economic efficiency maximization framework addressing this concern.
Proceedings Title
The European Safety and Reliability Conference (ESREL) 2015
Conference Dates
September 7-10, 2015
Conference Location
Zurich

Keywords

networked systems, systemic risk, abrupt vs. gradual instability, Perron-Frobenius

Citation

Marbukh, V. (2015), Towards Unified Perron-Frobenius Framework for Managing Systemic Risk in Networked Systems, The European Safety and Reliability Conference (ESREL) 2015 , Zurich, -1, [online], https://tsapps.nist.gov/publication/get_pdf.cfm?pub_id=918984 (Accessed April 13, 2024)
Created September 3, 2015, Updated May 15, 2020