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

Juraj Hledik, Riccardo Rastelli

Publication: Working/Discussion Paper

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.
Original languageEnglish
Place of PublicationVienna
Publication statusPublished - 8 Aug 2018

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