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Systemic importance of financial institutions: A complex network perspective

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  • Yang, Xin
  • Wen, Shigang
  • Zhao, Xian
  • Huang, Chuangxia

Abstract

This paper employs Clayton copula model to construct a lower tail network for 88 financial institutions in the USA from January 2006 to December 2018. Then, the corresponding minimal spanning tree(MST) map is generated. We find that the financial institution network is divided into 11 communities by community analysis, where the insurance institutions are identified as systemically important sectors. Furthermore, we investigate the systemic importance of financial institutions(SIFIs) by centrality measures, and find that the dominating institutions are J P Morgan Chase & Co, Raymond James Financial, Inc. and Prudential Financial, Inc. In addition, we use normalized tree length to identify financial crises, and it decreased sharply during the subprime crisis.

Suggested Citation

  • Yang, Xin & Wen, Shigang & Zhao, Xian & Huang, Chuangxia, 2020. "Systemic importance of financial institutions: A complex network perspective," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 545(C).
    • Handle: RePEc:eee:phsmap:v:545:y:2020:i:c:s0378437119319223
    DOI: 10.1016/j.physa.2019.123448
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    Cited by:

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    2. Wang, Ze & Gao, Xiangyun & Huang, Shupei & Sun, Qingru & Chen, Zhihua & Tang, Renwu & Di, Zengru, 2022. "Measuring systemic risk contribution of global stock markets: A dynamic tail risk network approach," International Review of Financial Analysis, Elsevier, vol. 84(C).
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    5. Xin Yang & Shan Chen & Hong Liu & Xiaoguang Yang & Chuangxia Huang, 2023. "Jump volatility spillover network based measurement of systemic importance of Chinese financial institutions," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1201-1213, April.

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