On the reactive nature of financial networks

We propose to model financial networks as distributed and reactive systems. Both financial institutions and financial contracts such as loans, assets or derivatives, are embodied as concurrent entities. These entities operate in parallel and dynamically update their state as a reaction to events issued by other entities. e.g. a macroeconomic shock or a bank default. The model is given in terms of an architectural pattern that can be directly implemented as an Actor system. We show how this reactive model can be used to study the systemic risk of financial networks and to design and conduct very flexible stress tests that include macroeconomic shocks and derivative contracts such as Credit Default Swaps.