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A multi-layer network of the sovereign securities market

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  • Carlos León
  • Jhonatan Pérez
  • Luc Renneboog

Abstract

We study the network of Colombian sovereign securities settlements. With data from the settlement market infrastructure we study financial institutions’ transactions from three different trading and registering individual networks that we combine into a multi-layer network. Examining this network of networks enables us to confirm that (i) studying isolated single-layer trading and registering networks yields a misleading perspective on the relations between and risks induced by participating financial institutions; (ii) a multi-layer approach produces a connective structure consistent with most real-world networks (e.g. sparse, inhomogeneous, and clustered); and (iii) the multi-layer network is a multiplex that preserves the main connective features of its constituent layers due to positively correlated multiplexity. The results highlight the importance of mapping and understanding how financial institutions relate to each other across multiple financial environments, and the value of financial market infrastructures as sources of data that may help to overcome the main obstacles for working on multi-layer financial networks.

Suggested Citation

  • Carlos León & Jhonatan Pérez & Luc Renneboog, 2014. "A multi-layer network of the sovereign securities market," Borradores de Economia 12036, Banco de la Republica.
  • Handle: RePEc:col:000094:012036
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    References listed on IDEAS

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    Cited by:

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    2. Temizsoy, Asena & Iori, Giulia & Montes-Rojas, Gabriel, 2017. "Network centrality and funding rates in the e-MID interbank market," Journal of Financial Stability, Elsevier, vol. 33(C), pages 346-365.
    3. Bewaji, Oluwasegun, 2024. "A computational model of bilateral credit limits in payment systems and other financial market infrastructures," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 5(1).
    4. León, Carlos & Berndsen, Ron J., 2014. "Rethinking financial stability: Challenges arising from financial networks’ modular scale-free architecture," Journal of Financial Stability, Elsevier, vol. 15(C), pages 241-256.

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    More about this item

    Keywords

    Multiplex networks; financial market infrastructures; correlated multiplexity; settlement.;
    All these keywords.

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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