New YorkTimes (1 May 2010) published a great visualization (Bill Marsh / The New York Times) of the debt relationships between European countries based on public data by BIS. Its reproduced below.
The Visual Science series of New York Times has many other captivating visualizations of data as well.
The ECB conference “Recent advances in modelling systemic risk using network analysis” was featured today in Securities Operations Week – a weekly publication focused on US and global securities operations, technology and compliance:
“The financial crisis that began to emerge in 2007 and that gained steam in 2008 famously gave rise to the oft-cited slogan “too big to fail” It also saw the coinage of a lesser-known catchphrase kicked around commonly now in research circles: “too networked to fail”. A summation released last week by the European Central Bank offers what may be the best discussion to date on the subject. [read the full article (pdf)]
Large Value Transfer System (LVTS)
The year 2009 is now gone and its time to look back at the research on financial networks and related topics from that year. Here are some that I found. Please help me add to the list.
Liasons Dangereuses: Incresing connectivity, risk sharing and systemic risk (by Stefano Battiston, Domenico Delli Gatti, Mauro Gallegati, Bruce C. Greenwald and Joseph E. Stiglitz). [link]
Rethinking the Financial Network (A speech by Andrew Haldane at the Financial Student Association, Amsterdam April 2009). [link]
On the Informational Properties of Trading Networks (by Lada Adamic, Celso Brunetti, Jeffrey H. Harris, and Andrei A. Kirilenko). [link]
The Financial Crisis and the Systemic Failure of Academic Economics (by David Colander, Hans Föllmer, Armin Haas, Michael D. Goldberg, Katarina Juselius, Alan Kirman, Thomas Lux, and Birgitte Sloth). Univ. of Copenhagen Dept. of Economics Discussion Paper No. 09-03. [link]
Identifying Community Structures from Network Data via Maximum Likelihood Methods (by Jernej Copi, Matthew O. Jackson, and Alan Kirman), The B.E. Journal of Theoretical Economics: Vol. 9 : Iss. 1 (Contributions), Article 30. [link]
Pedro Romero has three papers on banking networks: “The Evolution of Economic Networks” [link], “Banking Crises and Institutional Arrangements”. [link], and “Bank Runs, Banking Contracts, and Social Networks” [link]
A Comparison of the Director Networks of the Main Listed Companies in France, Germany, Italy, the United Kingdom, and the United States (by Paolo Santella, Carlo Drago, Andrea Polo, and Enrico Gagliardi). [link]
Structure and Stability in Payment Networks – A Panel Data Analysis of ARTIS Simulations (by Stefan Schmitz and Claus Puhr). [link]
Visualizing Stock-Mutual Fund Relationships through Social Network Analysis (by Rafael Solis), Global Journal of Finance and Banking Issues Vol. 3. No. 3. 2009. [link]
The sterling unsecured loan market during 2006-2008: insights from network topology (Anne Wetherilt, Peter Zimmerman and Kimmo Soramaki); in Leinonen (ed) Simulation analyses and stress testing of payment networks, Bank of Finland Scientific monographs E:42. [link]
After a little over a month of development, beta version 1.0 of the tool is now ready. It is an open source project sponsored by Norges Bank. The code is available at Google Code (get in touch with me to participate) and the documentation on Google docs. Currently the tool has a command line user interface and its main features include:
To install the tool simply download the latest version and copy the contents of the .zip file to some directory. You start the program from start.bat. You can try that it works by typing:
run -file data/script.txt
it runs script.txt file (in /data folder) which contains some commands to build and analyze networks created from example data (also under the /data folder). Please let me know of any bugs or needs for improvement.
For other similar tools, see the Social network analysis software article on wikipedia
The year is coming to an end and it a good time to look back at how this blog evolved during the year. I started it in March 2008 mainly as my personal blog but as I noticed that most of the articles covered financial networks in one sense or another, and that there was no other blog on the emerging area of financial networks research – I redesigned it during this year to what you see now. I also set up a LinkedId group to bring people working in the area together and for disseminating information on new research or conferences in the area. Please join if you are at LinkedIn.
Of course it is also interesting to know if anyone is reading this blog? According to Google Analytics installed on the site there is quite a steady readership of 80-100 unique visitors each week. Between 15 November and 15 December there were a total of 605 visits and 1667 page views. I think this is pretty good and motivates me to do an even better job in 2010. The below map shows the geographic distribution of the visitors.
Merry Christmas/Holidays and a Happy New Year to all the readers!
MITACS is organizing a Workshop on Financial Networks and Risk Assessment, taking place in Toronto from May 19 to May 21, 2010. The workshop is part of the MITACS International Focus Period on Advances in Network Analysis and its Applications and will be attended by 30-50 specialists in the field (from academia and business) as well as students. The 3 day event will consist of plenary talks, tutorials and contributed talks.
I started a project with Norges Bank to develop an easy and comprehensive tool specifically geared towards creating and analysing financial networks constructed of trade or payment data. Its is an open source project and the program and code will be available at fna.sourceforge.net already during the development phase. The first phase of development for a command line utility is expected to be completed within this year. Specifications for the project are available as a Google document. All feedback and contributions to the project are welcomed.
A few conference announcements from INSNA mailing list:
IMF report on using network models as basis for charges on systemically important banks
Recently the idea has been floated that systemically important financial institutions should be charged insurance premia to cover for government support in times of stress. The recent IMF report (April 2010) for G20 ministers now suggests that:
In order to operationalize the network approach, however, more both theoretical and empirical research is needed – as well as access to more frequent and granular data.