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Systemic risk assessment through high order clustering coefficient

Author

Listed:
  • Roy Cerqueti

    (Sapienza University of Rome
    London South Bank University)

  • Gian Paolo Clemente

    (Universitá Cattolica del Sacro Cuore)

  • Rosanna Grassi

    (University of Milano - Bicocca)

Abstract

In this article we propose a novel measure of systemic risk in the context of financial networks. To this aim, we provide a definition of systemic risk which is based on the structure, developed at different levels, of clustered neighbours around the nodes of the network. The proposed measure incorporates the generalized concept of clustering coefficient of order l of a node i introduced in Cerqueti et al. (2018). Its properties are also explored in terms of systemic risk assessment. Empirical experiments on the time-varying global banking network show the effectiveness of the presented systemic risk measure and provide insights on how systemic risk has changed over the last years, also in the light of the recent financial crisis and the subsequent more stringent regulation for globally systemically important banks.

Suggested Citation

  • Roy Cerqueti & Gian Paolo Clemente & Rosanna Grassi, 2021. "Systemic risk assessment through high order clustering coefficient," Annals of Operations Research, Springer, vol. 299(1), pages 1165-1187, April.
  • Handle: RePEc:spr:annopr:v:299:y:2021:i:1:d:10.1007_s10479-020-03525-8
    DOI: 10.1007/s10479-020-03525-8
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    References listed on IDEAS

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    Cited by:

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    4. Mikhail Stolbov & Daniil Parfenov, 2023. "Credit risk linkages in the international banking network, 2000–2019," Risk Management, Palgrave Macmillan, vol. 25(3), pages 1-38, September.

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    More about this item

    Keywords

    Systemic risk; Clustering coefficient; Community structures; Network analysis; Cross-border banking;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics

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