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Network Analysis of the e-MID Overnight Money Market: The Informational Value of Different Aggregation Levels for Intrinsic Dynamic Processes

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  • Karl Finger
  • Daniel Fricke
  • Thomas Lux

Abstract

In this paper, we analyze the network properties of the Italian e-MID data based on overnight loans during the period 1999-2010. We show that the networks appear to be random at the daily level, but contain significant non-random structure for longer aggregation periods. In this sense, the daily networks cannot be considered as being representative for the underlying `latent' network. Rather, the development of various network statistics under time aggregation points toward strong non-random determinants of link formation. We also identify the global financial crisis as a significant structural break for many network measures

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File URL: https://www.ifw-members.ifw-kiel.de/publications/network-analysis-of-the-e-mid-overnight-money-market-the-informational-value-of-different-aggregation-levels-for-intrinsic-dynamic-processes-1/KWP_1782.pdf
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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1782.

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Length: 26 pages
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:kie:kieliw:1782

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Keywords: interbank market; network models; financial crisis;

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  1. Cocco, João F. & Gomes, Francisco J. & Martins, Nuno C., 2009. "Lending relationships in the interbank market," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 18(1), pages 24-48, January.
  2. Bech, Morten L. & Atalay, Enghin, 2010. "The topology of the federal funds market," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 389(22), pages 5223-5246.
  3. Gallegati, Mauro & Giulioni, Gianfranco & Kirman, Alan & Palestrini, Antonio, 2011. "What’s that got to do with the price of fish? Buyers behavior on the Ancona fish market," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 80(1), pages 20-33.
  4. Brunnermeier, Markus K & Pedersen, Lasse Heje, 2007. "Market Liquidity and Funding Liquidity," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6179, C.E.P.R. Discussion Papers.
  5. Brodt, Abraham I., 1978. "A dynamic balance sheet management model for a Canadian chartered bank," Journal of Banking & Finance, Elsevier, Elsevier, vol. 2(3), pages 221-241, October.
  6. Iori, G. & Masi, G. D. & Precup, O. V. & Gabbi, G. & Caldarelli, G., 2005. "A network analysis of the Italian oversight money market," Working Papers, Department of Economics, City University London 05/05, Department of Economics, City University London.
  7. de Masi, G. & Iori, G. & Caldarelli, G., 2006. "A fitness model for the Italian interbank money market," Working Papers, Department of Economics, City University London 06/08, Department of Economics, City University London.
  8. Helmut Elsinger & Alfred Lehar & Martin Summer, 2006. "Using Market Information for Banking System Risk Assessment," International Journal of Central Banking, International Journal of Central Banking, International Journal of Central Banking, vol. 2(1), March.
  9. Soramäki, Kimmo & Bech, Morten L. & Arnold, Jeffrey & Glass, Robert J. & Beyeler, Walter E., 2007. "The topology of interbank payment flows," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 379(1), pages 317-333.
  10. Fricke, Daniel, 2012. "Trading strategies in the overnight money market: Correlations and clustering on the e-MID trading platform," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 391(24), pages 6528-6542.
  11. Kirman, Alan P. & Vriend, Nicolaas J., 2001. "Evolving market structure: An ACE model of price dispersion and loyalty," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 25(3-4), pages 459-502, March.
  12. Daniel Fricke & Thomas Lux, 2013. "On the Distribution of Links in the Interbank Network: Evidence from the e-Mid Overnight Money Market," Kiel Working Papers 1819, Kiel Institute for the World Economy.
  13. Beaupain, Renaud & Durré, Alain, 2012. "Nonlinear liquidity adjustments in the euro area overnight money market," Working Paper Series, European Central Bank 1500, European Central Bank.
  14. Michael Boss & Helmut Elsinger & Martin Summer & Stefan Thurner, 2004. "Network topology of the interbank market," Quantitative Finance, Taylor & Francis Journals, Taylor & Francis Journals, vol. 4(6), pages 677-684.
  15. F. Kyriakopoulos & S. Thurner & C. Puhr & S. W. Schmitz, 2009. "Network and eigenvalue analysis of financial transaction networks," The European Physical Journal B - Condensed Matter and Complex Systems, Springer, Springer, vol. 71(4), pages 523-531, October.
  16. 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.
  17. Wilkinson, Ian & Young, Louise, 2002. "On cooperating: firms, relations and networks," Journal of Business Research, Elsevier, Elsevier, vol. 55(2), pages 123-132, February.
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Citations

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Cited by:
  1. Vinko Zlati\'c & Giampaolo Gabbi & Hrvoje Abraham, 2014. "Reduction of systemic risk by means of Pigouvian taxation," Papers 1406.5817, arXiv.org.
  2. Mattia Montagna & Thomas Lux, 2013. "Hubs and resilience: towards more realistic models of the interbank markets," Kiel Working Papers 1826, Kiel Institute for the World Economy.
  3. Daniel Fricke & Thomas Lux, 2013. "On the Distribution of Links in the Interbank Network: Evidence from the e-Mid Overnight Money Market," Kiel Working Papers 1819, Kiel Institute for the World Economy.
  4. 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.

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