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arXiv · 2601.01505

Chaos and Synchronization in Financial Leverages Dynamics: Modeling Systemic Risk with Coupled Unimodal Maps

Marco Ioffredi·Stefano Marmi·Matteo Tanzi
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Abstract

Systemic financial risk refers to the simultaneous failure or destabilization of multiple financial institutions, often triggered by contagion mechanisms or common exposures to shocks. In this paper, we present a dynamical model of bank leverage (the ratio of asset holdings to equity) a quantity that both reflects and drives risk dynamics. We model how banks, constrained by Value-at-Risk (VaR) regulations, adjust their leverage in response to changes in the price of a single asset, assumed to be held in fixed proportion across banks. This leverage-targeting behavior introduces a procyclical feedback loop between asset prices and leverage. In the dynamics, this can manifest as logistic-like behavior with a rich bifurcation structure across model parameters. By analyzing these coupled dynamics in both isolated and interconnected bank models, we outline a framework for understanding how systemic risk can emerge from seemingly rational micro-level behavior.

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BibTeXRIS

Marco Ioffredi, Stefano Marmi, Matteo Tanzi. 2026-01-04. Chaos and Synchronization in Financial Leverages Dynamics: Modeling Systemic Risk with Coupled Unimodal Maps. https://arxiv.org/abs/2601.01505

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