Why do vulnerability cycles matter in financial networks

摘要: Abstract We compare two widely employed models that estimate systemic risk: DebtRank and Differential DebtRank. show not only network cyclicality but also the average vulnerability of banks are essential concepts contribute to widening gap in risk estimates both approaches. find same whenever has no cycles. However, case presents cyclicality, then we need inspect underestimation gap. is small regardless when its large. In contrast, observed follows a quadratic behavior or intermediate. results using an econometric exercise draw guidelines on artificial real-world financial networks.