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Type Journal Article
Scope Discipline-based scholarship
Title The Physics of Financial Networks
Organization Unit
Authors
  • Marco Bardoscia
  • Paolo Barucca
  • Stefano Battiston
  • Fabio Caccioli
  • Giulio Cimini
  • Diego Garlaschelli
  • Fabio Saracco
  • Tiziano Squartini
  • Guido Caldarelli
Item Subtype Original Work
Refereed Yes
Status Published in final form
Language
  • English
Journal Title Nature Reviews. Physics
Publisher Nature Publishing Group
Geographical Reach international
ISSN 2522-5820
Volume 3
Page Range 490 - 507
Date 2021
Abstract Text As the total value of the global financial market outgrew the value of the real economy, financial institutions created a global web of interactions that embodies systemic risks. Understanding these networks requires new theoretical approaches and new tools for quantitative analysis. Statistical physics contributed significantly to this challenge by developing new metrics and models for the study of financial network structure, dynamics, and stability and instability. In this Review, we introduce network representations originating from different financial relationships, including direct interactions such as loans, similarities such as co-ownership and higher-order relations such as contracts involving several parties (for example, credit default swaps) or multilayer connections (possibly extending to the real economy). We then review models of financial contagion capturing the diffusion and impact of shocks across each of these systems. We also discuss different notions of ‘equilibrium’ in economics and statistical physics, and how they lead to maximum entropy ensembles of graphs, providing tools for financial network inference and the identification of early-warning signals of system-wide instabilities.
Free access at Related URL
Official URL https://www.nature.com/articles/s42254-021-00322-5
Related URLs
Digital Object Identifier 10.1038/s42254-021-00322-5
Other Identification Number merlin-id:21131
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