Inhomogeneous random graphs, isolated vertices, and Poisson approximation

Consider a graph on randomly scattered points in an arbitrary space, with two points $x,y$ connected with probability $\phi(x,y)$. Suppose the number of points is large but the mean number of isolated points is $O(1)$. We give general criteria for the latter to be approximately Poisson distributed. More generally, we consider the number of vertices of fixed degree, the number of components of fixed order, and the number of edges. We use a general result on Poisson approximation by Stein's method for a set of points selected from a Poisson point process. This method also gives a good Poisson approximation for U-statistics of a Poisson process.Comment: 31 page

Projective, Sparse, and Learnable Latent Position Network Models

When modeling network data using a latent position model, it is typical to assume that the nodes' positions are independently and identically distributed. However, this assumption implies the average node degree grows linearly with the number of nodes, which is inappropriate when the graph is thought to be sparse. We propose an alternative assumption---that the latent positions are generated according to a Poisson point process---and show that it is compatible with various levels of sparsity. Unlike other notions of sparse latent position models in the literature, our framework also defines a projective sequence of probability models, thus ensuring consistency of statistical inference across networks of different sizes. We establish conditions for consistent estimation of the latent positions, and compare our results to existing frameworks for modeling sparse networks.Comment: 51 pages, 2 figure

Computationally efficient inference for latent position network models

Latent position models are widely used for the analysis of networks in a variety of research fields. In fact, these models possess a number of desirable theoretical properties, and are particularly easy to interpret. However, statistical methodologies to fit these models generally incur a computational cost which grows with the square of the number of nodes in the graph. This makes the analysis of large social networks impractical. In this paper, we propose a new method characterised by a linear computational complexity, which can be used to fit latent position models on networks of several tens of thousands nodes. Our approach relies on an approximation of the likelihood function, where the amount of noise introduced by the approximation can be arbitrarily reduced at the expense of computational efficiency. We establish several theoretical results that show how the likelihood error propagates to the invariant distribution of the Markov chain Monte Carlo sampler. In particular, we demonstrate that one can achieve a substantial reduction in computing time and still obtain a good estimate of the latent structure. Finally, we propose applications of our method to simulated networks and to a large coauthorships network, highlighting the usefulness of our approach.Comment: 39 pages, 10 figures, 1 tabl

A Dynamic Latent-Space Model for Asset Clustering

Periods of financial turmoil are not only characterized by higher correlation across assets but also by modifications in their overall clustering structure. In this work, we develop a dynamic Latent-Space mixture model for capturing changes in the clustering structure of financial assets at a fine scale. Through this model, we are able to project stocks onto a lower dimensional manifold and detect the presence of clusters. The infinite-mixture assumption ensures tractability in inference and accommodates cases in which the number of clusters is large. The Bayesian framework we rely on accounts for uncertainty in the parameters’ space and allows for the inclusion of prior knowledge. After having tested our model’s effectiveness and inference on a suitable synthetic dataset, we apply the model to the cross-correlation series of two reference stock indices. Our model correctly captures the presence of time-varying asset clustering. Moreover, we notice how assets’ latent coordinates may be related to relevant financial factors such as market capitalization and volatility. Finally, we find further evidence that the number of clusters seems to soar in periods of financial distress

Continuous Latent Position Models for Instantaneous Interactions

We create a framework to analyse the timing and frequency of instantaneous interactions between pairs of entities. This type of interaction data is especially common nowadays, and easily available. Examples of instantaneous interactions include email networks, phone call networks and some common types of technological and transportation networks. Our framework relies on a novel extension of the latent position network model: we assume that the entities are embedded in a latent Euclidean space, and that they move along individual trajectories which are continuous over time. These trajectories are used to characterize the timing and frequency of the pairwise interactions. We discuss an inferential framework where we estimate the individual trajectories from the observed interaction data, and propose applications on artificial and real data.Comment: 33 page

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

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