Latsis Symposium 2012
29
2012
159
18 hours 59 minutes
29 results
43:02
12Goette, LorenzDoes society shape individuals? Examining this question is difficult, as individuals influence the collective just as the collective may influence the individual. We use a large-scale field experiment to solve this causality problem and show that groups with stronger community participation render their members generally more altruistic and trusting towards anonymous strangers. Moreover, stronger community participation also causes a boost in trust towards those who reciprocate favours, thus generating stronger implicit punishment for untrustworthy individuals. Increased community participation enhances the strategic sophistication of individuals and raises the prevalence of Machiavellian strategies.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
46:27
5Fagiolo, GiorgioIn the last years, complex-network analysis has been applied to several fields in economics, giving rise to a wide literature, both empirical and theoretical. In this talk, I will overview some recent work exploring the properties of the international-trade network (ITN), defined as the graph where nodes are world countries and links represent bilateral trade flows (imports or exports). I address five main questions: (1) Why characterizing trade flows using a network representation may be relevant for trade economists? (2) Can the knowledge of the ITN topological properties shed new light on issues like growth, globalization and trade integration? (3) Can we separate ITN topological properties that are the sheer outcome of randomness from those that are instead statistically significant? (4) Is the gravity model of trade able to replicate the observed ITN structure? (5) Can we explain the properties of the ITN in terms of standard economic forces such as country specialization and comparative advantage?
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
49:31
6Tyran, Jean-RobertMoney illusion refers to a tendency to think about economic transactions in terms of nominal rather than real values. While standard economics assumes that all economic agents are free from money illusion, increasing evidence suggests that thinking in nominal terms is common, that purely nominal changes can affect individual choices, and that money illusion can shape outcomes in labor, housing and asset markets. The lecture argues that experiments can be used to understand when money illusion matters for economic outcomes – and when it does not.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
45:00
3Rochet, Jean Charles et al.We model a Systemically Important Financial Institution (SIFI) that is too big (or too interconnected) to fail. Without credible regulation and strong supervision, the shareholders of this institution might deliberately let its managers take excessive risk. We propose a solution to this problem, showing how insurance against systemic shocks can be provided without generating moral hazard. The solution involves levying a systemic tax needed to cover the costs of future crises and more importantly establishing a Systemic Risk Authority endowed with special resolution powers, including the control of bankers' compensation packages during crisis periods.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
1:30:07
4Blum, Juerg et al.Panel Discussion - Discussion about the role of Systemic Risks in a modern, highly interconnected world. Especially the question Are There Lessons To Be Learned? will be addressed - triggered, but not limited to - the recent economic crisis.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
30:40
3Murphy, RyanStochastic game theory unifies both strategic interactions and random processes into a single analytic framework. Along these lines, we develop a simple risky choice problem, and then extend that decision theoretic problem into a strategic context. We derive the equilibrium for this simple 2-player zero sum game and show that its mixed strategy equilibrium is both complicated and highly sensitive to the stochastic process. Further we show a non-zero sum version of this game, and then outline several experiments along these lines.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
51:38
2Houser, Danielelf-control resolves conflict between altruistic and selfish impulses. Self-control requires energy, and in work environments controlling one’s short-run desires can have a detrimental impact on subsequent productivity. Further, controlling selfish impulses is more difficult when costs of altruistic effort for others are monetized. Brain imaging data suggest altruism is mediated by social reward systems. These systems may be difficult to activate (that is, self-control more difficult) in the presence of pecuniary costs, as money is perceived as an individual resource.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
25:35
Page, Frank et al.One of the most striking phenomena of the 2007-2009 financial crises was the rapidity with which liquidity in the interbank markets dried up, especially in long term maturities. In network literature terminology, the once dense interbank network that allowed highly liquid banks to channel liquidity to those banks with investment opportunities, transited to a sparse architecture. The sudden failure of the once well-functioning interbank loan network during the recent financial crisis has given momentum to the movement toward major, worldwide regulatory reform to minimize the possibility of another interbank network failure and to make the financial network more robust. The shortcomings of the regulatory framework exposed by the crisis lead to the design and implementation of new instruments aimed at the insuring the stability of the financial system. One of these instruments, now in use in several European countries, is a special banking levy/tax. The levy/tax aims not only to raise funds to reduce the cost to taxpayers incurred with past (or future) rescues of the financial infrastructure but also to provide banks with the correct incentives for risk taking. The purpose of this paper is twofold: (i) to analyze within a dynamic network formation game how macroeconomic conditions, such as investors' risk appetite, affect rollover decisions and (ii) to determine the effects that a levy has on the endogenous dynamics of network formation. We find that because the existence of linkages between market participants generates an informational externality, the newly formed network is strongly conditioned by past network architectures. Simulations show that this inertia is strongly dependent on macroeconomic conditions, such as investors' risk appetite. The numerical exercises reveal that for intermediate values of the risk appetite parameter, the inability to maintain a threshold number of linkages may push the market into a gridlock. Moreover, this tipping point property implies that the recovery from a market freeze situation requires good conditions of a magnitude considerably greater than the magnitude of the bad conditions precipitated the crisis in the first place – leading to a network induced inertia. Finally, since we model the special banking levy as a cost to the activation of interbank connections, we find that a substantial decline in the tax burden is required in order to re-start lending activity when the market experiences severe stress situations. Thus while we find that banking levy instruments play an important role in aligning private and social incentives for risk taking - and therefore, constitute an important part of the regulatory landscape - if the activation of each interbank connection has an externality that is particularly onerous during periods of financial stress, the weight of this instrument (i.e., banking levies) should be counter-cyclical, as are the recent capital requirement proposals supported both by academia and regulatory bodies.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
35:53
7Helbing, DirkWe argue that, if we are to find a more satisfactory approach to tackling the major socio-economic problems with which we are faced, we may need to thoroughly rethink the basic assumptions of macroeconomic and financial theory. Making minor modifications to the standard models to remove “imperfections” may not be enough, the whole framework may need to be reconstructed. Let us first enumerate some of the standard assumptions and postulates of economic theory: The first of these is the idea that an economy is an equilibrium system. In other words it is a system in which all markets systematically clear at each point of time but where the equilibrium may be perturbed, from time to time by exogenous shocks. The second is that the selfish or greedy behaviour of individuals yields a result which is beneficial to society, a modern and inadequate restatement of Adam Smith’s description of “the invisible hand”. Thirdly, Individuals and companies decide rationally. By this is meant that individuals optimize under the constraints with which they are faced and that their choices satisfy some standard axioms of consistency. Fourthly, the behaviour of the all agents together can be treated as corresponding to that of the average or representative individual. Fifthly when the financial sector is analysed it is assumed that financial markets are efficient. Efficiency here meaning that all the relevant information about the price of an asset is reflected by the price of that asset. Thus no individual has any incentive to seek information for himself. Sixthly in financial markets it is assumed that the more liquid they are the better they function. Lastly in financial markets the more connected the network of links between individuals and institutions the more risk is spread and the more stable and robust the system. We will show computer simulations or analyses of other social systems that question assumptions such as the above, but also give a perspective of how a new theoretical approach may be developed that is in better agreement with real-world evidence.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
30:35
Luciani, Matteo et al.Based on the definition of systemic risk given by Jean-Claude Trichet at Clare College in Cambridge (Dec. 2009), we propose a simple methodology for ranking systemically important institutions. We incorporate both the cross sectional aspects of risks through firms interrelations and the time series aspects of the evolution of this interconnectedness over time. We view firm's risks as a network with vertices equal to the volatility shocks and edges equal to their correlations. Dynamic centrality measures allow us to rank the firms in terms of risk connectedness and firm characteristics. The resulting global systemic risk (GS) measure from applying this approach to all firms in the S&P500 for 2003-2011 reveals that the systemic risk in the financial sector stocks peaked in September 2008, but was greatly reduced by the introduction of TARP. Anxiety about European debt markets saw the systemic risk begin to rise again from April 2010. We further decompose these results to find that the systemic risk of insurance and deposit taking institutions differs importantly, the latter experienced generally declining systemic risk from late 2007, in line with burst of the housing price bubble, while risk for insurance companies continued to climb up to the rescue of AIG. Our systemic risk index emphasises interconnectedness: a comparison of this with the capital shortfall approach of Brownlees and Engle (2011) shows that while risk due to interconnectedness declined post September 2008, capital shortfall risk remained at sustained levels. The two approaches offer complementary information. Further, we show the importance of including the interconnectedness of the financial sector with firms in the real economy, in producing measures of systemic risk.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
39:34
6Filimonov, VladimirWe introduce a new measure of activity of financial markets that provides a direct access to their level of endogeneity. This measure quantifies how much of price changes are due to endogenous feedback processes, as opposed to exogenous news. For this, we calibrate the self-excited conditional Poisson Hawkes model, which combines in a natural and parsimonious way exogenous influences with self-excited dynamics, to the E-mini S&P 500 futures contracts traded in the Chicago Mercantile Exchange from 1998 to 2010. We find that the level of endogeneity has increased significantly from 1998 to 2010, with only 70% in 1998 to less than 30% since 2007 of the price changes resulting from some revealed exogenous information. Analogous to nuclear plant safety concerned with avoiding "criticality", our measure provides a direct quantification of the distance of the financial market to a critical state defined precisely as the limit of diverging trading activity in absence of any external driving. This talk represents work with D. Sornette (PRE 85 (5), 2012: 056108)
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
12:12
1Schweitzer, Frank et al.The Latsis Symposium of ETH Zurich is a prestigious yearly event, sponsored by the Latsis foundation. Organized by the Chair of Systems Design of ETH Zurich, the Latsis Symposium 2012 asks the provocative question: Can economics as a scientific discipline benefit from the natural sciences? During the three-day interdisciplinary symposium, this question will be discussed by leading researchers from economics and the natural sciences.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
28:53
5Zehnder, ChristianRecent theoretical work on on incomplete contracts suggests that contracts may not only define trading parties' rights and obligations but may also have important psychological effects. In particular, it has been hypothesized that competitively negotiated ex ante contracts may provide salient reference points which shape perceived entitlements in ex post trade. A series of papers demonstrates that the existence of such contractual reference points has a number of important implications for the theory of the firm. We have conducted a series of controlled laboratory experiments testing the empirical relevance of the underlying behavioral assumptions of this new strand of literature. Our evidence is highly supportive for the hypothesis that contracts serve as reference points. Specifically, we find that there is an important trade-off between contractual rigidity and flexibility. While the existence of this trade-off is in line with the theory of contractual reference points, it is in strong contrast to both standard economic theory and established behavioral models of social preferences. Further experimental conditions also reveal that the central behavioral mechanism underlying the concept of contractual reference points is robust to the presence of informal agreements and ex post renegotiation.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
36:06
2Riedl, ArnoExperiments in economics and psychology have critically contributed to the development of new theoretical (behavioral) models of individual and social behavior. Experiments may not only be used to falsify existing models but can also suggest the right way of modeling. This will be exemplified by a novel study on the incompleteness of preferences in decisions under uncertainty where the major (behavioral) models fail to account for observed behavior. Moreover, in a strategic setting it will be shown that economics experiments that ignore the power of partner choice in social interaction are likely doomed to produce misleading predictions for field behavior and to give wrong guidance for theory development.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
46:51
2Saviotti, Pier-PaoloIn this paper the representation of the knowledge base of firms, research organizations or fields of knowledge as a network will be described. Networks of this type have nodes constituted by units of knowledge defined at a given level of aggregation and links determined by the interactions of such units. Examples of such units are the technological classes associated to patents or the themes that can be identified in scientific publications or patents. The paper will describe the application of this approach to the dynamics of knowledge in firms, research organizations or fields of knowledge by mapping the changes occurring in the structure of knowledge and by measuring some relevant properties of the of the knowledge bases, such as their coherence, variety or cognitive distance. Among other applications this approach can allow us to detect the presence of knowledge discontinuities, such as technological paradigms, and their impact on the behaviour of firms or research organizations.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
47:56
2Goyal, SanjeevConnections between individuals facilitate the exchange of goods, resources and information and create benefits. However, the connections are costly to create and also serve as conduits for the spread of attacks and viruses. What are the implications of this trade-off for the network design and the nature of contagion in networks. The talk will present an overview of theoretical models and empirical studies of network resilience.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
44:48
3Weber, RobertoMany economic contexts possess multiple equilibria. These situations are important for many reasons, including because they are often where traditional theoretical approaches fail to generate precise or accurate predictions. I discuss recent experimental studies that demonstrate how, in situations with multiple equilibria, behavior can change dramatically in ways unaccounted for by current theoretical models. This evidence highlights the need for improved behavioral theories of equilibrium selection, comparable to advances in other areas of behavioral economic research.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
32:33
Scala, Antonio et al.We use a simple model of distress propagation (the sandpile model) to shows how financial systems are naturally subject to the risk of systemic failures. Taking into account possible network structures among financial institutions, we investigate if simple policies can limit financial distress propagation to avoid system-wide crises, i.e. to dampen systemic risk. We therefore compare different immunization policies (targeted helps to financial institutions) and find that the information coming from the network topology allows to mitigate systemic cascades by targeting just few institutions. Furthermore, our analysis points that ”Rich Clubs” can significatively enhance the effects of targeted policies for securing the financial network. This result represents a higly controversial point from the perspective of policy makers trying to enforce a free market and to avoid oligopolies.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
33:08
28Feng, XiaobingThe negative externalities from an individual bank failure to the whole system can be huge. One of the key purposes of bank regulation is to internalize the social costs of potential bank failures via capital charges. This study proposes a method to evaluate and allocate the systemic risk to different countries using a SIR type of epidemic spreading model and the Shapley value in game theory. The paper also explores features of a constructed bank network using real globe-wide banking data. The major findings are that the magnitude of the systemic risk at the national level is related to the degree distribution of a bank in a nonlinear fashion. To be more specific, it depends on whether the network is more heterogeneous such as a scale free network, or more homogeneous such as an exponential or even a regular network. The constructed global banking network includes over 30,000 public and private overseas banks all over the world. The systemic important institutions are identified.The detected modularity of the global network indicates that the geographical location still plays roles in formulating the communities. The systemic risk is internalized by capital charges required from each country. The capital charge is evaluated based on the country level systemic risk. A type-two-holling function is used to convert systemic risk to capital charge. Finally we suggest that individual risk control policy should be combined to the systemic risk control policy to maintain the stability of the system, neither of which can be ignored. This is an advice that is different from the current policy stance that emphasizes only the safety of individual bank.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
28:01
6Langfield, Sam et al.This paper describes the features of the UK interbank system, using a newly available regulatory dataset on counterparty-level interbank exposures. To our knowledge, this dataset is the most granular representation of a large interbank market available worldwide. We present recently developed metrics which characterise the network from the point of view of financial-system stability. We pay particular attention to four complexities. Firstly, the network exhibits multiple layering: nodes are connected by up to 150 types of financial instruments, including prime lending, fixed income, CDS, repos, derivatives and others, at a spectrum of maturities. Secondly, each link is directed from bank A to bank B. Thirdly, each link has a weight, which corresponds to the pound sterling value of the exposure or funding source. Fourthly, nodes are diverse in their balance sheet characteristics. Comprehensive matching between the interbank exposures dataset, a regulatory balance-sheet dataset and public data allows us to capture this heterogeneity. The interbank network clearly exhibits a 'hub and spoke' structure. Most of the 176 banks resident in the UK are exposed to a handful of money-centre banks. We infer that the UK interbank system is 'robust yet fragile': it is resilient against random shocks, but vulnerable to targeted attacks. We conclude by suggesting avenues for future research, particularly on how financial policy might respond to such network structure in order to improve financial-system stability.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
44:53
1Detken, CarstenThe Latsis Symposium of ETH Zurich is a prestigious yearly event, sponsored by the Latsis foundation. Organized by the Chair of Systems Design of ETH Zurich, the Latsis Symposium 2012 asks the provocative question: Can economics as a scientific discipline benefit from the natural sciences? During the three-day interdisciplinary symposium, this question will be discussed by leading researchers from economics and the natural sciences.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
45:53
5Vega-Redondo, Fernando et al.We propose a stylised dynamic model to understand the role of social networks in the phenomenon we call "globalization." This term refers to the process by which even agents who are geographically far apart come to interact, thus overcoming what would otherwise be a fast saturation of local opportunities. A key feature of our model is that the social network is the main channel through which agents search and exploit new opportunities. Thus only if the social network becomes globaI (heuristically, "reaches far") can global interaction be steadily sustained. To shed light on the conditions under which such a transformation may, or may not, take place is the main objective of the paper. One of our interesting insights is that in order for a local social network to turn global, the economy needs to display a degree of "geographical cohesion" that is neither too high (for then global opportunities simply do not arise) nor too low (in which case there is too little social structure for the process to take off). And if globalization does arise, we show that it often occurs abruptly and consolidates as a robust state of affairs. We also show how it is affected by improvements in the flow at which information travels in the network, or the range at which the social network helps to monitor behavior.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
27:27
1Sutter, MatthiasExperimental economics applies controlled conditions to investigate the causal factors that drive economic behavior. Recent work has been focusing on how experimental choices relate to field behavior. We link teenagers? decisions in an intertemporal choice experiment to their savings decisions and health related behavior (such as smoking). We do not only find important correlations, but also a predictive power of experimental choices for field behavior a few years later.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
53:00
3Stiglitz, Joseph E.The Latsis Symposium of ETH Zurich is a prestigious yearly event, sponsored by the Latsis foundation. Organized by the Chair of Systems Design of ETH Zurich, the Latsis Symposium 2012 asks the provocative question: Can economics as a scientific discipline benefit from the natural sciences? During the three-day interdisciplinary symposium, this question will be discussed by leading researchers from economics and the natural sciences.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
34:32
24Amini, HamedPropagation of balance-sheet or cash-flow insolvency across financial institutions may be modeled as a cascade process on a network representing their mutual exposures. In the first part, we derive rigorous asymptotic results for the magnitude of contagion in a large financial network and give an analytical expression for the asymptotic fraction of defaults, in terms of network characteristics. Our results extend previous studies on contagion in random graphs to inhomogeneous directed graphs with a given degree sequence and arbitrary distribution of weights. We introduce a criterion for the resilience of a large financial network to the insolvency of a small group of financial institutions and quantify how contagion amplifies small shocks to the network. Our results emphasize the role played by 'contagious links' and show that institutions which contribute most to network instability in case of default have both large connectivity and a large fraction of contagious links. The asymptotic results show good agreement with simulations for networks with realistic sizes. This part of talk is based on joint work with Rama Cont and Andreea Minca. In the second part, we consider the problem of a lender of last resort who seeks to minimize the magnitude of contagion under budget constraints. In case the lender observes the interbank exposures progressively, as banks report their exposures to banks in default, we can model distress propagation under intervention as a Markov Decision Process. We find the optimal intervention policy as a result of Hamilton Jacobi Bellman equations. Our results show that, in the case of non-anticipative information, the optimal strategy depends in a non-linear way on the fraction of banks that use short-term funding. This part is based on a joint work with Jean-Philippe Chancelier, Andreea Minca and Agnes Sulem.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
24:20
18Lasio, Giovanni diA default of a bank has cascade-effects in a financial network in which entities are tightly intertwined. The cascade may propagate sequentially with additional defaults, from close neighbors to distant banks. Many contributions show that banking systems seem to be fairly stable to contagion via credit risk, as very large shocks are needed to simulate cascades of a meaningful size. We use a novel method - DebtRank – from previous contributions of one of the authors, to assess the centrality of a bank in a network, accounting for the propagation of distress even in the absence of defaults in the cascade. Indeed, an event that weakens the balance-sheet of a bank j, has a negative spillover on the balance sheet of claim-holders of j (contagion through distress). In this respect, the centrality of a bank is (i) proportional to its relative exposure toward the source of distress and (ii) depends on its financial soundness. DebtRank solves the infinite reverberation problem typical of contagion in networks with loops. We estimate the total potential loss to the financial system caused either by an initial default of a single institution or by a common shock to several institutions. The method also allows to find candidate subsets of institutions that, together, may constitute systemically important groups. We use a unique dataset of supervisory reports to the Bank of Italy that includes (i) bilateral exposures (secured and unsecured, short and long term) between all Italian banks, (ii) the links with major foreign financial institutions and (iii) balance sheet data (capital, total and encumbered assets,…).
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
32:01
1Molinari, MassimoIn this paper we employ network analysis to re-assess competition policy within a macroprudential framework. Such an exercise seems to be relevant as it explicitly addresses a question posed forcefully by Haldane (2009), that is whether policy interventions can alter the topological network structure with the declared aim of improving network robustness. Here we concentrate on the idea that central banks and antitrust authorities have the opportunity to design the structure of the industry by choosing how banks are allowed to merge. Merges change the topology of the system for three reasons: 1) larger banks are formed as the summation of smaller ones; 2) the total number of active banks decrease; 3) large banks generally possess more connections than small banks. One can imagine that different competition policies (e.g., let just one very big bank to form by allowing it to acquire a large number of smaller banks; limit the size of each merger to just two small units, etc.) lead to different network topologies, which could in principle be characterized by different degrees of resilience to shocks. If this is the case, competition policy can be interpreted as an additional tool for macro-prudential regulation aimed at preventing systemic crises. We build an agent-based computational laboratory of an interbank network and employ three different types of M&A strategies as network-changing devices, in order to evaluate their effect on the resilience of the system. Our results suggest that topologies are not all alike: more specifically, it appears that a concentrated and yet asymmetric system is better geared to cope with an external shock. By contrast, concentrated and symmetric markets turns out to be in fact more fragile than a competitive one. The extent of the damage to the system depends on the exposure to interbank claims, the degree of connectivity, the structure of the network and capital requirements. In addition, we put forward the idea that capital requirements should be network-varying. Different shock-amplifying dynamics are observed because flat capital requirements force an inefficient allocation of net worth within the system. For example, it turns out that large banks are forced to hold too much capital whereas small institutions have less than what it is necessary and this misallocation renders the system less resilient. Once we introduce network-varying capital requirements, the robustness of the system improves and this aligns the performance of different topologies. The clear policy implication is that the regulator shall closely monitor the structure of the network and its evolution over time because policy on capital requirements is sensitive to it and one size does not fit all. We need to improve our effort towards the production of reliable and up-to-date data that allows us to map banking networks as precisely as possible.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
54:44
5Cont, RamaThe recent financial crisis has simultaneously underlined the importance of systemic risk and the absence of an appropriate framework for assessing, monitoring and regulating it. Modeling systemic risk requires to change the traditional focus of risk modeling and examine the structure and stability of the financial system as a whole, with special attention given to contagion mechanisms which may lead to large scale instabilities in the financial system. We present some recent work on the quantitative modeling of systemic risk, focusing on three key channels for financial contagion: balance sheet contagion, illiquidity cascades and price-mediated contagion generated by feedback effects. Finally, we discuss the implications of these results for monitoring of systemic risk.
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)
24:19
4Tabak, BenjaminRecent literature has focused on the study of systemic risk in complex networks. It is clear now, after the crisis of 2008, that the aggregate behavior of the interaction among the agents is not straightforward and it is very difficulty to predict. Contributing to this debate, this paper shows that the directed clustering coefficient may be used as a measure of systemic risk in complex networks. Furthermore, using data from the Brazilian bank interbank network, we show that the directed in clustering coefficient is negatively correlated with domestic interest rates
2012Eidgenössische Technische Hochschule Zürich (ETH Zürich)