Cross-asset contagion and risk transmission in global financial networks

Abstract

This research examines cross-asset contagion and risk transmission by modeling global financial markets as a dynamic network, integrating equities, currencies, commodities, and cryptocurrencies. Using extreme value theory and tail-dependent copulas, we develop novel measures of contagion centrality and risk pathways, uncovering a persistent core-periphery structure where central assets exhibit shock-absorber properties during crises, while peripheral nodes amplify systemic fragility. Our findings reveal that financial contagion intensifies under stress, with enduring post-crisis interconnectedness, challenging traditional diversification strategies. Crucially, network topology-not just asset class-determines vulnerability: central assets demonstrate resilience to tail risks, whereas peripheral nodes face heightened susceptibility. These insights have profound implications for systemic risk monitoring, suggesting regulators prioritize real-time tracking of core-periphery linkages, while investors adjust hedging strategies to account for nonlinear contagion channels. The study advances financial network theory by unifying cross-asset spillovers within a topological framework and offers actionable tools for crisis mitigation in interconnected markets.