Stefano Battiston, "Leveraging the network: a stress-test framework based on DebtRank", In: Society for Economic Measurement. 2015. (Conference Presentation)
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Fausto Bonacina, Marco D'Errico, Enrico Moretto, Silvana Stefani, Giovanni Zambruno, Anna Torriero, A multiple network approach to corporate governance, Quality & Quantity, Vol. 49 (4), 2015. (Journal Article)
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Marco Bardoscia, Stefano Battiston, Fabio Caccioli, Guido Caldarelli, DebtRank: A Microscopic Foundation for Shock Propagation, PLoS ONE, Vol. 10 (7), 2015. (Journal Article)
The DebtRank algorithm has been increasingly investigated as a method to estimate the impact of shocks in financial networks, as it overcomes the limitations of the traditional default-cascade approaches. Here we formulate a dynamical “microscopic” theory of instability for financial networks by iterating balance sheet identities of individual banks and by assuming a simple rule for the transfer of shocks from borrowers to lenders. By doing so, we generalise the DebtRank formulation, both providing an interpretation of the effective dynamics in terms of basic accounting principles and preventing the underestimation of losses on certain network topologies. Depending on the structure of the interbank leverage matrix the dynamics is either stable, in which case the asymptotic state can be computed analytically, or unstable, meaning that at least one bank will default. We apply this framework to a dataset of the top listed European banks in the period 2008–2013. We find that network effects can generate an amplification of exogenous shocks of a factor ranging between three (in normal periods) and six (during the crisis) when we stress the system with a 0.5% shock on external (i.e. non-interbank) assets for all banks. |
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Stefano Battiston, "How can Network models enhance the policymaker's toolkit", In: Netconomics 2015 Zaragoza, Spain, 1.-5. Juni. 2015. (Conference Presentation)
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Stefano Battiston, "Complex financial networks", In: Financial Networks at Lake Como School of Advanced Studies. 2015. (Conference Presentation)
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Stefano Battiston, "The Price of Complexity in financial networks" , In: INET Seminar Series. 2015. (Conference Presentation)
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Stefano Battiston, "Leverage the network: a stress test framework based on DebtRank ",Topic: Financial Networks, Financial Innovation & Inequality , In: Liberté, Egalité, Fragilité, INET Annual Conference. 2015. (Conference Presentation)
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Stefano Battiston, Leverage the network: a stress-test framework based on DebtRank , In: IPAM Workshop I, systemic risk and financial networks. 2015. (Conference Presentation)
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Stefano Battiston, "Leveraging the network: a stress-test framework based on DebtRank", In: Workshop Socio-Economic Complexity. 2015. (Conference Presentation)
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Stefano Battiston, Key note speach: "Price of complexity in financial networks" , In: WEHIA Conference. 2015. (Conference Presentation)
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Stefano Battiston, Guido Caldarelli, Robert May, Tarik Roukny, Joseph Stiglitz, The Price of Complexity in Financial Networks, In: Columbia Business School Research Paper, No. No. 15-49, 2015. (Working Paper)
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Stefano Battiston, Guido Caldarelli, Marco D'Errico, Stefano Gurciullo, Leveraging the Network: A Stress-Test Framework Based on DebtRank, In: SSRN, No. 2571218, 2015. (Working Paper)
We develop a novel stress-test framework to monitor systemic risk in financial systems. The modular structure of the framework allows to accommodate for a variety of shock scenarios, methods to estimate interbank exposures and mechanisms of distress propagation. The main features are as follows. First, the framework allows to estimate and disentangle not only first-round effects (i.e. shock on external assets) and second-round effects (i.e. distress induced in the interbank network), but also third-round effects induced by possible fire sales. Second, it allows to monitor at the same time the impact of shocks on individual or groups of financial institutions as well as their vulnerability to shocks on counterparties or certain asset classes. Third, it includes estimates for loss distributions, thus combining network effects with familiar risk measures such as VaR and CVaR. Fourth, in order to perform robustness analyses and cope with incomplete data, the framework features a module for the generation of sets of networks of interbank exposures that are coherent with the total lending and borrowing of each bank. As an illustration, we carry out a stress--test exercise on a dataset of listed European banks over the years 2008-2013. We find that second-round and third-round effects dominate first-round effects, therefore suggesting that most current stress-test frameworks might lead to a severe underestimation of systemic risk. |
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An Zeng, Stefano Battiston, The Multiplex Network of EU Lobby Organizations, In: SSRN, No. 2571869, 2015. (Working Paper)
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Marco D'Errico, Corrado Macchiarelli, Roberta Serafini, Differently unequal: Zooming-in on the distributional dimensions of the crisis in euro area countries, In: LSE ‘Europe in Question’ Discussion Paper Series, No. 86, 2015. (Working Paper)
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Marco D'Errico, Corrado Macchiarelli, Roberta Serafini, Differently unequal: Zooming-in on the distributional dimensions of the crisis in euro area countries, Economic Modelling, Vol. 48, 2015. (Journal Article)
This paper discusses how income inequality developed during the current crisis in euro area countries, as well as the role played by each income source. Based on an extended definition of income – including additional components which do not appear in the standard Eurostat definitions – we complement the information provided by the Gini index and quantile ratios by computing an alternative inequality indicator, developed by Zenga (2007), and its decomposition by income source. While broadly confirming the distributional effect of the crisis documented in previous studies, we find that in specific countries the level of inequality appears higher when alternative measures are taken into account, and that the rise of inequality since 2008 has not been as modest as the previous studies would suggest. The paper further looks at how the distribution of income has evolved during the crisis by income quantile groups (i.e. ‘zooming-in’). The results point to varying contribution of labour income in 2011 compared to 2007. In addition, while the impact of individual households' characteristics shows a non-linear pattern across income quantile groups before the crisis, such dispersion has decreased in 2011.
We argue that, on the basis of our analysis, not only euro area countries are “differently unequal” in that inequality has developed in a very peculiar way in different countries, but also because it needs to be tackled at a finer level of analysis. |
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Michelangelo Puliga, Guido Caldarelli, Stefano Battiston, Credit default swaps networks and systemic risk, Scientific Reports, Vol. 4 (6822), 2014. (Journal Article)
Credit Default Swaps (CDS) spreads should reflect default risk of the underlying corporate debt. Actually, it has been recognized that CDS spread time series did not anticipate but only followed the increasing risk of default before the financial crisis. In principle, the network of correlations among CDS spread time series could at least display some form of structural change to be used as an early warning of systemic risk. Here we study a set of 176 CDS time series of financial institutions from 2002 to 2011. Networks are constructed in various ways, some of which display structural change at the onset of the credit crisis of 2008, but never before. By taking these networks as a proxy of interdependencies among financial institutions, we run stress-test based on Group DebtRank. Systemic risk before 2008 increases only when incorporating a macroeconomic indicator reflecting the potential losses of financial assets associated with house prices in the US. This approach indicates a promising way to detect systemic instabilities. |
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Marco D'Errico, Gulnur Muradoglu, Silvana Stefani, Giovanni Zambruno, Opinion Dynamics and Price Formation: a Nonlinear Network Model, In: arXiv preprint, No. 1408.0308, 2014. (Working Paper)
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Marco D'Errico, Silvana Stefani, Anna Torriero, Informal ties in organizations : a case study, Quality and Quantity, Vol. 48 (4), 2014. (Journal Article)
Network techniques are applied to a case study. The results show that using a joint approach can help in giving further insight into the analysis of informal ties in an organization. Special emphasis is given to centrality. The concept of mutual awareness, both on an individual and a global levels, is introduced and illustrated. |
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Stefano Battiston, Tasca Paolo, Diversification and financial stability, In: SRC Discussion Paper, No. 10, 2014. (Working Paper)
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Giulio Cimini, Tiziano Squartini, Nicolo Musmeci, Michelangelo Puliga, Andrea Gabrielli, Diego Garlaschelli, Stefano Battiston, Guido Caldarelli, Reconstructing Topological Properties of Complex Networks Using the Fitness Model, In: Social Informatics, Springer, Cham, p. 323 - 333, 2014. (Book Chapter)
A major problem in the study of complex socioeconomic systems is represented by privacy issues—that can put severe limitations on the amount of accessible information, forcing to build models on the basis of incomplete knowledge. In this paper we investigate a novel method to reconstruct global topological properties of a complex network starting from limited information. This method uses the knowledge of an intrinsic property of the nodes (indicated as fitness), and the number of connections of only a limited subset of nodes, in order to generate an ensemble of exponential random graphs that are representative of the real systems and that can be used to estimate its topological properties. Here we focus in particular on reconstructing the most basic properties that are commonly used to describe a network: density of links, assortativity, clustering. We test the method on both benchmark synthetic networks and real economic and financial systems, finding a remarkable robustness with respect to the number of nodes used for calibration. The method thus represents a valuable tool for gaining insights on privacy-protected systems. |
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