Battiston, Stefano and Puliga, Michelangelo and Kaushik, Rahul and Tasca, Paolo and Caldarelli, Guido DebtRank: Too Central to Fail? Financial Networks, the FED and Systemic Risk. (Nature) Scientific Reports, 2 (541). pp. 1-6. ISSN 2045-2322 (2012)
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Abstract
Systemic risk, here meant as the risk of default of a large portion of the financial system, depends on the network of financial exposures among institutions. However, there is no widely accepted methodology to determine the systemically important nodes in a network. To fill this gap, we introduce, DebtRank, a novel measure of systemic impact inspired by feedback-centrality. As an application, we analyse a new and unique dataset on the USD 1.2 trillion FED emergency loans program to global financial institutions during 2008–2010. We find that a group of 22 institutions, which received most of the funds, form a strongly connected graph where each of the nodes becomes systemically important at the peak of the crisis. Moreover, a systemic default could have been triggered even by small dispersed shocks. The results suggest that the debate on too-big-to-fail institutions should include the even more serious issue of too-central-to-fail.
| Item Type: | Article |
|---|---|
| Identification Number: | https://doi.org/10.1038/srep00541 |
| Projects: | EC Grant FET Open Project ‘‘FOC’’ 255987 |
| Uncontrolled Keywords: | Applied physics; Modelling and theory; Statistical physics, thermodynamics and nonlinear dynamics; Theoretical physics |
| Subjects: | H Social Sciences > HA Statistics Q Science > QC Physics |
| Research Area: | Economics and Institutional Change |
| Depositing User: | Ms T. Iannizzi |
| Date Deposited: | 07 Aug 2012 07:49 |
| Last Modified: | 07 Apr 2016 08:28 |
| URI: | http://eprints.imtlucca.it/id/eprint/1331 |
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