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The Multiplex Structure of Interbank Networks

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Author Info

  • Leonardo Bargigli

    (DISEI, Università degli Studi di Firenze)

  • Giovanni Di Iasio

    (Bank of Italy)

  • Luigi Infante
  • Fabrizio Lillo
  • Federico Pierobon

    (Bank of Italy - Banking and Finance Supervision Department)

Abstract

The interbank market has a natural multiplex network representation. We employ a unique database of supervisory reports of Italian banks to the Banca d'Italia that includes all bilateral exposures broken down by maturity and by the secured and unsecured nature of the contract. We find that layers have different topological properties and persistence over time. The presence of a link in a layer is not a good predictor of the presence of the same link in other layers. Maximum entropy models reveal different unexpected substructures, such as network motifs, in different layers. Using the total interbank network or focusing on a specific layer as representative of the other layers provides a poor representation of interlinkages in the interbank market and could lead to biased estimation of systemic risk.

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Bibliographic Info

Paper provided by Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa in its series Working Papers - Economics with number wp2013_26.rdf.

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Length: 42 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:frz:wpaper:wp2013_26.rdf

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Keywords: interbank market; network theory; systemic risk;

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References

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  1. Bech, Morten L. & Atalay, Enghin, 2010. "The topology of the federal funds market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(22), pages 5223-5246.
  2. Gara Afonso & Anna Kovner & Antoinette Schoar, 2011. "Stressed, Not Frozen: The Federal Funds Market in the Financial Crisis," Journal of Finance, American Finance Association, vol. 66(4), pages 1109-1139, 08.
  3. Daniel Fricke & Karl Finger & Thomas Lux, 2013. "On Assortative and Disassortative Mixing Scale-Free Networks: The Case of Interbank Credit Networks," Kiel Working Papers 1830, Kiel Institute for the World Economy.
  4. Simone LENZU & Gabriele TEDESCHI, 2012. "Systemic risk on different interbank network topologies," Working Papers 375, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  5. Mistrulli, Paolo Emilio, 2011. "Assessing financial contagion in the interbank market: Maximum entropy versus observed interbank lending patterns," Journal of Banking & Finance, Elsevier, vol. 35(5), pages 1114-1127, May.
  6. Hamed Amini & Rama Cont & Andreea Minca, 2012. "Stress Testing The Resilience Of Financial Networks," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 15(01), pages 1250006-1-1.
  7. Iori, G. & Masi, G. D. & Precup, O. V. & Gabbi, G. & Caldarelli, G., 2005. "A network analysis of the Italian oversight money market," Working Papers 05/05, Department of Economics, City University London.
  8. Bargigli, Leonardo & Gallegati, Mauro, 2011. "Random digraphs with given expected degree sequences: A model for economic networks," Journal of Economic Behavior & Organization, Elsevier, vol. 78(3), pages 396-411, May.
  9. Thomas Lux, Daniel Fricke, 2012. "Core-Periphery Structure in the Overnight Money Market: Evidence from the e-MID Trading Platform," Kiel Working Papers 1759, Kiel Institute for the World Economy.
  10. Christoffer Kok & Mattia Montagna, 2013. "Multi-layered Interbank Model for Assessing Systemic Risk," Kiel Working Papers 1873, Kiel Institute for the World Economy.
  11. Kimmo Soramaki & Morten L. Bech & Jeffrey Arnold & Robert J. Glass & Walter Beyeler, 2006. "The topology of interbank payment flows," Staff Reports 243, Federal Reserve Bank of New York.
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Cited by:
  1. di Iasio, Giovanni & Battiston, Stefano & Infante, Luigi & Pierobon, Federico, 2013. "Capital and Contagion in Financial Networks," MPRA Paper 52141, University Library of Munich, Germany.
  2. Giulia Iori & Rosario N. Mantegna & Luca Marotta & Salvatore Micciche' & James Porter & Michele Tumminello, 2014. "Networked relationships in the e-MID Interbank market: A trading model with memory," Papers 1403.3638, arXiv.org.

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