Modeling Systemic Risk Propagation in Banking Systems with Nonlinear Incidence Effects

Modeling Systemic Risk Propagation in Banking Systems with Nonlinear Incidence Effects | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Modeling Systemic Risk Propagation in Banking Systems with Nonlinear Incidence Effects Hamza AIT TAMERZ, Karam ALLALI, Adil MESKAF This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-6487316/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract This study develops a nonlinear deterministic framework to examine systemic risk propagation in interconnected banking networks. The proposed model categorizes financial institutions into five distinct compartments: Undistressed (risk-free), Exposed, Distressed, Recovered, and Liquidated. Its principal innovation lies in incorporating a saturation-dependent nonlinear incidence rate that captures the deceleration of risk transmission as the undistressed bank population grows, mirroring real-world constraints such as regulatory barriers and finite network absorption capacity. We analytically derive equilibrium conditions to establish stability boundaries, complemented by comprehensive local and global stability analyses. Through numerical simulations, we visualize contagion dynamics and quantitatively validate our theoretical predictions. The results provide novel insights into financial contagion pathways and offer concrete policy recommendations for systemic risk mitigation in banking ecosystems. systemic risk banking networks nonlinear incidence effect financial contagion stability analysis risk management equilibrium points contagion dynamics Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-6487316","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":450234676,"identity":"e1338703-3e16-4de7-a586-a0b68d3f8921","order_by":0,"name":"Hamza AIT TAMERZ","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAABDklEQVRIie3PMUsDMRTA8XcEnHK9NXDa+wrvOCiIpV/EpXLQLgm6t2CKQ5e6K4J+hXTJfCXQWwTXgkvdddBJaYvmHEoR460O+UPCG/LjEQCf7z9GthP9vpv2YA0hgdwlWT2BH+RE1pFoHJXLD94+TWQ4e1usO31VGgXvQziO5O+EGRKMLnXvcCQbecxpLtR97yyYzEFcFY41lshQGyRAMeaMCLWgCKEEIR0kqbZs9CfuAc1WHM/7aEmwseTOQdCSi1AXSIG2Yt413YqQaotykNSQ9OZA58gIbR3xokyv7V/M/pyJqYM0H2bL1xfdwWQ8yR75epA0SjN9eh62xa3r+9vIzmwfs7r3Pp/P5/ujL5mrVwv67ehQAAAAAElFTkSuQmCC","orcid":"","institution":"Chouaib Doukkali University","correspondingAuthor":true,"prefix":"","firstName":"Hamza","middleName":"AIT","lastName":"TAMERZ","suffix":""},{"id":450234678,"identity":"cbdf34b3-baaa-48de-b4a9-524fb8308982","order_by":1,"name":"Karam ALLALI","email":"","orcid":"","institution":"University of Hassan II Casablanca","correspondingAuthor":false,"prefix":"","firstName":"Karam","middleName":"","lastName":"ALLALI","suffix":""},{"id":450234680,"identity":"6e763059-2ac4-4c35-93bf-eedf96a71138","order_by":2,"name":"Adil MESKAF","email":"","orcid":"","institution":"Chouaib Doukkali University","correspondingAuthor":false,"prefix":"","firstName":"Adil","middleName":"","lastName":"MESKAF","suffix":""}],"badges":[],"createdAt":"2025-04-20 04:08:09","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-6487316/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-6487316/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":83534382,"identity":"630499e6-b3e0-4828-bd6f-91afe2d15296","added_by":"auto","created_at":"2025-05-28 06:06:37","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":420667,"visible":true,"origin":"","legend":"","description":"","filename":"MODELI1.pdf","url":"https://assets-eu.researchsquare.com/files/rs-6487316/v1_covered_b0ea3cc8-6572-4a6d-825b-41c81fda87c5.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"Modeling Systemic Risk Propagation in Banking Systems with Nonlinear Incidence Effects","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"systemic risk, banking networks, nonlinear incidence effect, financial contagion, stability analysis, risk management, equilibrium points, contagion dynamics","lastPublishedDoi":"10.21203/rs.3.rs-6487316/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-6487316/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"This study develops a nonlinear deterministic framework to examine systemic risk propagation in interconnected banking networks. 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