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The missing links: A global study on uncovering financial network structures from partial data

Author

Listed:
  • Anand, Kartik
  • van Lelyveld, Iman
  • Banai, Ádám
  • Friedrich, Soeren
  • Garratt, Rodney
  • Hałaj, Grzegorz
  • Fique, Jose
  • Hansen, Ib
  • Jaramillo, Serafín Martínez
  • Lee, Hwayun
  • Molina-Borboa, José Luis
  • Nobili, Stefano
  • Rajan, Sriram
  • Salakhova, Dilyara
  • Silva, Thiago Christiano
  • Silvestri, Laura
  • de Souza, Sergio Rubens Stancato

Abstract

Capturing financial network linkages and contagion in stress test models are important goals for banking supervisors and central banks responsible for micro- and macroprudential policy. However, granular data on financial networks is often lacking, and instead the networks must be reconstructed from partial data. In this paper, we conduct a horse race of network reconstruction methods using network data obtained from 25 different markets spanning 13 jurisdictions. Our contribution is two-fold: first, we collate and analyze data on a wide range of financial networks. And second, we rank the methods in terms of their ability to reconstruct the structures of links and exposures in networks.

Suggested Citation

  • Anand, Kartik & van Lelyveld, Iman & Banai, Ádám & Friedrich, Soeren & Garratt, Rodney & Hałaj, Grzegorz & Fique, Jose & Hansen, Ib & Jaramillo, Serafín Martínez & Lee, Hwayun & Molina-Borboa, José Lu, 2018. "The missing links: A global study on uncovering financial network structures from partial data," Journal of Financial Stability, Elsevier, vol. 35(C), pages 107-119.
  • Handle: RePEc:eee:finsta:v:35:y:2018:i:c:p:107-119
    DOI: 10.1016/j.jfs.2017.05.012
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    Cited by:

    1. repec:bis:bisifc:49-14 is not listed on IDEAS
    2. Blasques, Francisco & Bräuning, Falk & Lelyveld, Iman van, 2018. "A dynamic network model of the unsecured interbank lending market," Journal of Economic Dynamics and Control, Elsevier, vol. 90(C), pages 310-342.
    3. repec:eee:finsta:v:38:y:2018:i:c:p:98-118 is not listed on IDEAS
    4. Ferrara, Gerardo & Langfield, Sam & Liu, Zijun & Ota, Tomohiro, 2016. "Systemic illiquidity in the interbank network," Bank of England working papers 586, Bank of England, revised 14 Aug 2017.
    5. Ramadiah, Amanah & Caccioli, Fabio & Fricke, Daniel, 2018. "Reconstructing and stress testing credit networks," ESRB Working Paper Series 84, European Systemic Risk Board.
    6. repec:eee:intfin:v:58:y:2019:i:c:p:78-95 is not listed on IDEAS
    7. Thiago Christiano Silva & Solange Maria Guerra & Benjamin Miranda Tabak, 2019. "Fiscal Risk and Financial Fragility," Working Papers Series 495, Central Bank of Brazil, Research Department.
    8. José Carreño & Rodrigo Cifuentes, 2017. "Identifying Complex Core-Periphery Structures in the Interbank Market," Working Papers Central Bank of Chile 813, Central Bank of Chile.
    9. Paul Glasserman, 2015. "Contagion in Financial Networks," Economics Series Working Papers 764, University of Oxford, Department of Economics.
    10. Zachary Feinstein & Weijie Pang & Birgit Rudloff & Eric Schaanning & Stephan Sturm & Mackenzie Wildman, 2017. "Sensitivity of the Eisenberg-Noe clearing vector to individual interbank liabilities," Papers 1708.01561, arXiv.org, revised Oct 2018.
    11. Paul Glasserman & H. Peyton Young, 2015. "Contagion in Financial Markets," Working Papers 15-21, Office of Financial Research, US Department of the Treasury.
    12. repec:spr:jcsosc:v:1:y:2018:i:1:d:10.1007_s42001-017-0008-3 is not listed on IDEAS
    13. Fabio Caccioli & Paolo Barucca & Teruyoshi Kobayashi, 2018. "Network models of financial systemic risk: a review," Journal of Computational Social Science, Springer, vol. 1(1), pages 81-114, January.
    14. Marnix Van Soom & Milan Van Den Heuvel & Jan Ryckebusch & Koen Schoors, 2019. "Loan Maturity Aggregation In Interbank Lending Networks Obscures Mesoscale Structure And Economic Functions," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 19/952, Ghent University, Faculty of Economics and Business Administration.
    15. repec:eee:phsmap:v:519:y:2019:i:c:p:1-17 is not listed on IDEAS
    16. Anouk Levels & René de Sousa van Stralen & Sînziana Kroon Petrescu & Iman van Lelyveld, 2018. "CDS market structure and risk flows: the Dutch case," DNB Working Papers 592, Netherlands Central Bank, Research Department.
    17. Sadamori Kojaku & Giulio Cimini & Guido Caldarelli & Naoki Masuda, 2018. "Structural changes in the interbank market across the financial crisis from multiple core-periphery analysis," Papers 1802.05139, arXiv.org.
    18. Tiziano Squartini & Guido Caldarelli & Giulio Cimini & Andrea Gabrielli & Diego Garlaschelli, 2018. "Reconstruction methods for networks: the case of economic and financial systems," Papers 1806.06941, arXiv.org.
    19. Jose Fique, 2017. "Retrieving Implied Financial Networks from Bank Balance-Sheet and Market Data," Staff Working Papers 17-30, Bank of Canada.

    More about this item

    Keywords

    Network reconstruction; Market structure; Intermediation;

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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