Squartini, Tiziano and Lelyveld, Iman van and Garlaschelli, Diego Early-warning signals of topological collapse in interbank networks. Scientific Reports, 3. p. 3357. ISSN 2045-2322 (2013)
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Abstract
The financial crisis clearly illustrated the importance of characterizing the level of ‘systemic’ risk associated with an entire credit network, rather than with single institutions. However, the interplay between financial distress and topological changes is still poorly understood. Here we analyze the quarterly interbank exposures among Dutch banks over the period 1998–2008, ending with the crisis. After controlling for the link density, many topological properties display an abrupt change in 2008, providing a clear – but unpredictable – signature of the crisis. By contrast, if the heterogeneity of banks' connectivity is controlled for, the same properties show a gradual transition to the crisis, starting in 2005 and preceded by an even earlier period during which anomalous debt loops could have led to the underestimation of counter-party risk. These early-warning signals are undetectable if the network is reconstructed from partial bank-specific data, as routinely done. We discuss important implications for bank regulatory policies.
| Item Type: | Article |
|---|---|
| Identification Number: | https://doi.org/10.1038/srep03357 |
| Uncontrolled Keywords: | Applied physics, Complex networks, Information theory and computation, Statistical physics |
| Subjects: | H Social Sciences > HA Statistics Q Science > QA Mathematics Q Science > QC Physics |
| Research Area: | Economics and Institutional Change |
| Depositing User: | Caterina Tangheroni |
| Date Deposited: | 05 Nov 2015 12:03 |
| Last Modified: | 08 Mar 2018 17:01 |
| URI: | http://eprints.imtlucca.it/id/eprint/2819 |
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