Related papers: Pathways towards instability in financial networks
Interbank lending and borrowing occur when financial institutions seek to settle and refinance their mutual positions over time and circumstances. This interactive process involves money creation at the aggregate level. Coordination…
A central challenge in financial economics is understanding how credit networks form under informational noise. We introduce the concept of topological capital, arguing that banks increasingly rely on topological certification, interpreting…
During a financial crisis, the capital markets network frequently exhibits a high correlation between returns. We developed a network analysis framework based on daily returns from 42 countries to determine systemic stability. Our network…
The global financial system can be represented as a large complex network in which banks, hedge funds and other financial institutions are interconnected to each other through visible and invisible financial linkages. Recently, a lot of…
Networks in nature do not act in isolation but instead exchange information, and depend on each other to function properly. An incipient theory of Networks of Networks have shown that connected random networks may very easily result in…
We model a network economy with three sectors: downstream firms, upstream firms, and banks. Agents are linked by productive and credit relationships so that the behavior of one agent influences the behavior of the others through network…
The financial market is a complex dynamical system composed of a large variety of intricate relationships between several entities, such as banks, corporations and institutions. At the heart of the system lies the stock exchange mechanism,…
Evaluation of systemic risk in networks of financial institutions in general requires information of inter-institution financial exposures. In the framework of Debt Rank algorithm, we introduce an approximate method of systemic risk…
This paper investigates two mechanisms of financial contagion that are, firstly, the correlated exposure of banks to the same source of risk, and secondly the direct exposure of banks in the interbank market. It will consider a random…
The theory of pattern formation in reaction-diffusion systems is extended to the case of a directed network. Due to the structure of the network Laplacian of the scrutinised system, the dispersion relation has both real and imaginary parts,…
The recent financial crisis of 2008 and the 2011 indebtedness of Greece highlight the importance of understanding the structure of the global financial network. In this paper we set out to analyze and characterize this network, as captured…
This work explores the characteristics of financial contagion in networks whose links distributions approaches a power law, using a model that defines banks balance sheets from information of network connectivity. By varying the parameters…
Common asset holdings are widely believed to have been the primary vector of contagion in the recent financial crisis. We develop a network approach to the amplification of financial contagion due to the combination of overlapping…
We develop a topology data analysis-based method to detect early signs for critical transitions in financial data. From the time-series of multiple stock prices, we build time-dependent correlation networks, which exhibit topological…
Financial markets are a typical example of complex systems where interactions between constituents lead to many remarkable features. Here, we show that a pairwise maximum entropy model (or auto-logistic model) is able to describe switches…
We provide an overview of the relationship between financial networks and systemic risk. We present a taxonomy of different types of systemic risk, differentiating between direct externalities between financial organizations (e.g.,…
We investigate the tendency for financial instruments to form clusters when there are multiple factors influencing the correlation structure. Specifically, we consider a stock portfolio which contains companies from different industrial…
A central issue in the study of large complex network systems, such as power grids, financial networks, and ecological systems, is to understand their response to dynamical perturbations. Recent studies recognize that many real networks…
The level of systemic risk in economic and financial systems is strongly determined by the structure of the underlying networks of interdependent entities that can propagate shocks and stresses. Since changes in network structure imply…
Network theory is rapidly changing our understanding of complex systems, but the relevance of topological features for the dynamic behavior of metabolic networks, food webs, production systems, information networks, or cascade failures of…