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AN URN MODEL FOR CASCADING FAILURES ON A LATTICE

Published online by Cambridge University Press:  30 July 2012

Pasquale Cirillo
Affiliation:
Institute of Mathematical Statistics and Actuarial Sciences, University of Bern, Sidlerstrasse 5, Bern CH3008, Switzerland E-mails: pasquale.cirillo@stat.unibe.ch; juerg.huesler@stat.unibe.ch
Jürg Hüsler
Affiliation:
Institute of Mathematical Statistics and Actuarial Sciences, University of Bern, Sidlerstrasse 5, Bern CH3008, Switzerland E-mails: pasquale.cirillo@stat.unibe.ch; juerg.huesler@stat.unibe.ch

Abstract

A cascading failure is a failure in a system of interconnected parts, in which the breakdown of one element can lead to the subsequent collapse of the others. The aim of this paper is to introduce a simple combinatorial model for the study of cascading failures. In particular, having in mind particle systems and Markov random fields, we take into consideration a network of interacting urns displaced over a lattice. Every urn is Pólya-like and its reinforcement matrix is not only a function of time (time contagion) but also of the behavior of the neighboring urns (spatial contagion), and of a random component, which can represent either simple fate or the impact of exogenous factors. In this way a non-trivial dependence structure among the urns is built, and it is used to study default avalanches over the lattice. Thanks to its flexibility and its interesting probabilistic properties, the given construction may be used to model different phenomena characterized by cascading failures such as power grids and financial networks.

Type
Research Article
Copyright
Copyright © Cambridge University Press 2012

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