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Cascades in real interbank markets
Umeå University, Faculty of Science and Technology, Department of Physics. (IceLab)
CAU Kiel, Department of Economics.
2016 (English)In: Computational Economics, ISSN 0927-7099, E-ISSN 1572-9974, Vol. 47, no 1, 46-66 p.Article in journal (Refereed) Published
Abstract [en]

We analyze cascades of defaults in an interbank loan market. The novel feature of this study is that the network structure and the size distribution of banks are derived from empirical data. We find that the ability of a defaulted institution to start a cascade depends on an interplay of shock size and connectivity. Further results indicate that the interbank loan network is structurally less stable after the financial crisis than it was before. To evaluate the influence of the network structure on market stability, we compare simulated cascades from the empirical network with results from different network models. The results show that the empirical network has non-random features, which cannot be captured by randomized networks. The analysis also reveals that simulations that assume homogeneity for banks and loan size tend to overestimate the fragility of the interbank market.

Place, publisher, year, edition, pages
2016. Vol. 47, no 1, 46-66 p.
Keyword [en]
default cascade, interbank markets, interbank loan network, systemic risk, cascades, null models
National Category
Research subject
Economics; Physics
URN: urn:nbn:se:umu:diva-96663DOI: 10.1007/s10614-014-9478-zISI: 000367852700004OAI: diva2:765645
Swedish Research Council

2016-05-16: Originally published in manuscript form.

Available from: 2014-11-24 Created: 2014-11-24 Last updated: 2016-05-16Bibliographically approved
In thesis
1. Tightly knit: spreading processes in empirical temporal networks
Open this publication in new window or tab >>Tightly knit: spreading processes in empirical temporal networks
2015 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

We live in a tightly knit world. Our emotions, desires, perceptions and decisions are interlinked in our interactions with others. We are constantly influencing our surroundings and being influenced by others. In this thesis, we unfold some aspects of social and economical interactions by studying empirical datasets. We project these interactions into a network representation to gain insights on how socio-economic systems form and function and how they change over time. Specifically, this thesis is centered on four main questions: How do the means of communication shape our social network structures? How can we uncover the underlying network of interests from massive observational data? How does a crisis spread in a real financial network? How do the dynamics of interaction influence spreading processes in networks? We use a variety of methods from physics, psychology, sociology, and economics as well as computational, mathematical and statistical analysis to address these questions.

Place, publisher, year, edition, pages
Umeå: Umeå University, 2015. 55 p.
National Category
Natural Sciences
Research subject
urn:nbn:se:umu:diva-98885 (URN)978-91-7601-209-3 (ISBN)
Public defence
2015-02-20, NC 300, Naturvetarhuset, Umeå, 12:00 (English)
Available from: 2015-01-30 Created: 2015-01-27 Last updated: 2015-02-05Bibliographically approved

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Karimi, Fariba
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