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The bounds of heavy-tailed return distributions in evolving complex networks


  • Jo~ao P. da Cruz
  • Pedro G. Lind


We consider the evolution of scale-free networks according to preferential attachment schemes and show the conditions for which the exponent characterizing the degree distribution is bounded by upper and lower values. Our framework is an agent model, presented in the context of economic networks of trades, which shows the emergence of critical behavior. Starting from a brief discussion about the main features of the evolving network of trades, we show that the logarithmic return distributions have bounded heavy-tails, and the corresponding bounding exponent values can be derived. Finally, we discuss these findings in the context of model risk.

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  • Jo~ao P. da Cruz & Pedro G. Lind, 2011. "The bounds of heavy-tailed return distributions in evolving complex networks," Papers 1109.2803,, revised Jan 2013.
  • Handle: RePEc:arx:papers:1109.2803

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    References listed on IDEAS

    1. Lux, T. & M. Marchesi, "undated". "Volatility Clustering in Financial Markets: A Micro-Simulation of Interacting Agents," Discussion Paper Serie B 437, University of Bonn, Germany, revised Jul 1998.
    2. Levy, Moshe & Levy, Haim & Solomon, Sorin, 1994. "A microscopic model of the stock market : Cycles, booms, and crashes," Economics Letters, Elsevier, vol. 45(1), pages 103-111, May.
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    1. Lee, Byung Kwon & Zhou, Rong & de Souza, Robert & Park, Jaehun, 2016. "Data-driven risk measurement of firm-to-firm relationships in a supply chain," International Journal of Production Economics, Elsevier, vol. 180(C), pages 148-157.

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