Regshock: Interactive Visual Analytics of Systemic Risk in Financial Networks

TL;DR

Regshock introduces a visual analytics framework for exploring and evaluating systemic risk mitigation strategies in financial networks, combining risk-centered visualization with simulation-based intervention assessment to aid financial regulators.

Contribution

It presents the first practical systemic method integrating visualization and simulation for financial network intervention and risk mitigation.

Findings

Effective risk pattern detection through risk-island visualization.

Heuristic surgical intervention capability demonstrated.

Validated approach improves financial risk management.

Abstract

Financial regulatory agencies are struggling to manage the systemic risks attributed to negative economic shocks. Preventive interventions are prominent to eliminate the risks and help to build a more resilient financial system. Although tremendous efforts have been made to measure multi-risk severity levels, understand the contagion behaviors and other risk management problems, there still lacks a theoretical framework revealing what and how regulatory intervention measurements can mitigate systemic risk. Here we demonstrate regshock, a practical visual analytical approach to support the exploration and evaluation of financial regulation measurements. We propose risk-island, an unprecedented risk-centered visualization algorithm to help uncover the risk patterns while preserving the topology of financial networks. We further propose regshock, a novel visual exploration and assessment approach based on the simulation-intervention-evaluation analysis loop, to provide a heuristic surgical intervention capability for systemic risk mitigation. We evaluate our approach through extensive case studies and expert reviews. To our knowledge, this is the first practical systemic method for the financial network intervention and risk mitigation problem; our validated approach potentially improves the risk management and control capabilities of financial experts.