The paper by Matthew Elliott, Benjamin Golub, and Matthew O. Jackson examines the dynamics of financial contagions and cascades of failures in a network of interdependent financial organizations. The authors develop a model that captures how discontinuous changes in asset values, such as defaults and shutdowns, can trigger further failures, and how this depends on the network structure. They find that integration (greater dependence on counterparties) and diversification (more counterparties per organization) have nonmonotonic effects on the extent of cascades. Diversification initially connects the network, allowing cascades to spread, but as it increases further, organizations become better insulated from each other's failures. Integration also faces trade-offs: increased dependence on other organizations versus reduced sensitivity to own investments. The authors illustrate their model using data on European debt cross-holdings and discuss the implications for policy and regulation. They conclude that intermediate levels of integration and diversification are most susceptible to widespread financial cascades, and that preventing the first failure is crucial to avoiding subsequent cascades.The paper by Matthew Elliott, Benjamin Golub, and Matthew O. Jackson examines the dynamics of financial contagions and cascades of failures in a network of interdependent financial organizations. The authors develop a model that captures how discontinuous changes in asset values, such as defaults and shutdowns, can trigger further failures, and how this depends on the network structure. They find that integration (greater dependence on counterparties) and diversification (more counterparties per organization) have nonmonotonic effects on the extent of cascades. Diversification initially connects the network, allowing cascades to spread, but as it increases further, organizations become better insulated from each other's failures. Integration also faces trade-offs: increased dependence on other organizations versus reduced sensitivity to own investments. The authors illustrate their model using data on European debt cross-holdings and discuss the implications for policy and regulation. They conclude that intermediate levels of integration and diversification are most susceptible to widespread financial cascades, and that preventing the first failure is crucial to avoiding subsequent cascades.