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Stefano Battiston
SFI Faculty Member
Professor of Banking
Stefano Battiston is SNF Professor at the Department of Banking and Finance of the University of Zurich. He became an SFI Faculty Member in 2017. His work applies the complex networks approach both to the empirical analysis of large economic networks and the modelling of their dynamics. For several years, his main interests have been financial contagion, default cascades, and propagation of financial distress, where he combines the insights from the statistical mechanics of networks with the analysis of economic incentives. He has been involved in many international projects, including FOC (Forecasting Financial Crises) the first European project aimed at anticipating structural instabilities in the global financial networks. He is now the coordinator of the FET project SIMPOL that investigates policy modeling in finance and climate finance. Since 2015 he also coordinates the FET project DOLFINS that investigates how to better channel finance towards sustainable economy in a networked economy. Within the Financial Stability Program directed by the Nobel laureate Joseph Stiglitz and funded by the Institute of New Economic Thinking, Stefano Battiston coordinates the Working Group on Financial Networks.
Research Interests:
His main research interests lie in socio-economic networks, financial networks, and on-line social networks.
Recent Research:
One of Prof. Battiston’s recent co-authored research papers contributes to the growing literature on diversification and financial stability. The model developed by the researchers suggests that financial interconnection initially serves as a shock-absorber for the financial market, but past a tipping point, this same interconnection becomes a shock-amplifier. This knife-edge dynamic emerges as, on the one hand, individuals have incentives to reduce their idiosyncratic risk exposure through asset diversification, whilst on the other hand such diversification increases the overall systemic risk society faces. In terms of policy recommendations, the researchers suggest that diversification should be encouraged when the markets are bullish and constrained when bearish. Hence, the objective of the regulator should be to manage the tradeoff between the social losses from defaults and the social costs of avoiding defaults, and not to target a specific level of default risk.