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arXiv · 2305.00838

Cascading failures: dynamics, stability and control

Stefanny Ramirez·Maaike Odijk·Dario Bauso
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Abstract

We develop a dynamic model of cascading failures in a financial network whereby cross-holdings are viewed as feedback, external assets investments as inputs and failure penalties as static nonlinearities. We provide sufficient milder and stronger conditions for the system to be a positive one, and study equilibrium points and stability. Stability implies absence of cascades and convergence of market values to constant values. We provide a constructive method for control design to obtain stabilizing market investments in the form of feedback-feedforward control inputs.

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Stefanny Ramirez, Maaike Odijk, Dario Bauso. 2023-05-01. Cascading failures: dynamics, stability and control. https://arxiv.org/abs/2305.00838

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