Financial network risk

Both macroeconomics and financial theory have failed to deal adequately with systemic risk. However, other disciplines have much to teach us about the stability and fragility of complex dynamic systems, argues David Rowe

Systemic risk is all the rage these days, exemplified by the widespread call for macro-prudential supervision. It is tempting to feel that, like the weather, everybody talks about systemic risk but nobody does anything about it. That situation may now be changing. Discussion is growing around the need for financial theory and analysis to absorb lessons from other disciplines concerning the behaviour of complex adaptive dynamic systems. These other disciplines include epidemiology, aircraft