A dynamic network model to measure exposure diversification in the Austrian interbank market

Hledik, Juraj and Rastelli, Riccardo (2018) A dynamic network model to measure exposure diversification in the Austrian interbank market.

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Abstract

We propose a statistical model for weighted temporal networks capable of measuring the level of heterogeneity in a financial system. Our model focuses on the level of diversification of financial institutions; that is, whether they are more inclined to distribute their assets equally among partners, or if they rather concentrate their commitment towards a limited number of institutions. Crucially, a Markov property is introduced to capture time dependencies and to make our measures comparable across time. We apply the model on an original dataset of Austrian interbank exposures. The temporal span encompasses the onset and development of the financial crisis in 2008 as well as the beginnings of European sovereign debt crisis in 2011. Our analysis highlights an overall increasing trend for network homogeneity, whereby core banks have a tendency to distribute their market exposures more equally across their partners.

Item Type: Paper
Additional Information: The authors kindly acknowledge the financial support of the Austrian Science Fund (FWF) as well as the possibility to use data provided by Aus trian National Bank (OeNB). This research was also supported by the Vienna Science and Technology Fund (WWTF) Project MA14-031.
Keywords: Latent Variable Models, Dynamic Networks, Austrian Interbank Market, Systemic Risk, Bayesian Inference
Divisions: Departments > Finance, Accounting and Statistics > Financial Research
Depositing User: ePub Administrator
Date Deposited: 15 Oct 2018 12:47
Last Modified: 15 Oct 2018 13:48
URI: https://epub.wu.ac.at/id/eprint/6579

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