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| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | DebtRank: Too Central to Fail? Financial Networks, the FED and Systemic Risk |
| Organization Unit | |
| Authors |
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| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published in final form |
| Language |
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| Journal Title | Scientific Reports |
| Publisher | Nature Publishing Group |
| Geographical Reach | international |
| ISSN | 2045-2322 |
| Volume | 2 |
| Page Range | 541 |
| Date | 2012 |
| Abstract Text | Systemic risk, here meant as the risk of default of a large portion of the financial system, depends on the network of financial exposures among institutions. However, there is no widely accepted methodology to determine the systemically important nodes in a network. To fill this gap, we introduce, DebtRank, a novel measure of systemic impact inspired by feedback-centrality. As an application, we analyse a new and unique dataset on the USD 1.2 trillion FED emergency loans program to global financial institutions during 2008–2010. We find that a group of 22 institutions, which received most of the funds, form a strongly connected graph where each of the nodes becomes systemically important at the peak of the crisis. Moreover, a systemic default could have been triggered even by small dispersed shocks. The results suggest that the debate on too-big-to-fail institutions should include the even more serious issue of too-central-to-fail. |
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| Digital Object Identifier | 10.1038/srep00541 |
| Other Identification Number | merlin-id:10164 |
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