Robustness of Networks with Skewed Degree Distributions under Strategic Node Protection

Previous studies on the robustness of networks against intentional attacks have suggested that protecting a small fraction of important nodes in a network significantly improves its robustness. In this paper, we analyze the robustness of networks under several strategic node protection schemes. Strategic node protection schemes select a small fraction of nodes as important nodes, using a network measuresuch as node centrality, and protect the important nodes to prevent them from being removed by intentional attacks. Our simulation results indicate that (1) strategic node protection significantly improves the robustness of networks with skewed degree distributions, (2) the efficiency of strategic node protection schemes is affected by the strength of community structure of the network being protected, and (3) strategic node protection based on betweenness centrality can effectively improve the robustness of networks regardless of the strength of community structure.ADMNET 2016: The 4th International Workshop on Architecture, Design, Deployment and Management of Networks and Applications(COMPSAC 2016: The 40th IEEE Computer Society International Conference on Computers, Software & Applications)Place: Atlanta, Georgia, USADate: June 10-14, 201

Impact of Changing Facets of Inter-firm Interactions on Manufacturing Excellence: A Social Network Perspective of Indian Automotive Industry.

The inherent complexity of the innovation process puts interaction among firms and their specificities concerning the patterns of interaction at the center-stage. Hence, an uncovering of the interactive pattern among firms in the industry may reveal many hidden patterns, viz., the existing dependence and dominance structure of firms and the evolving dynamical changes based their on. Guided by these, this paper studies the vertical relational structure of automotive and auto component firms in Indian automotive supply chain where a clear ‘unequal balance of power’ is observed. We find that the industry network shows some prominent scale-free structural properties and complex dynamical behaviour. While analyzing further the Indian automotive industry’s possible evolutionary features we draw innovation and sustainability characteristics of this network, its inclination towards vulnerability and other policy implications.

Shifting Sources of Humanitarian Aid: The Importance of Network Resiliency and Donor Diversification

As instances of forced displacement arise and become increasingly large and prolonged around the world, large influxes of humanitarian aid have become critical in assisting host countries with crisis response. The funding required to meet the immediate, emergency needs presented by a refugee situation is filled primarily by governmental humanitarian contributions, and more specifically, by the United States. Typically, the U.S. is integral to the structure of the networks of humanitarian aid being directed towards a humanitarian response as it is the largest donor, in most cases. However, what does this reliance on U.S. funding mean for the structural integrity of these networks? What happens when the U.S. cannot or will not provide relief to humanitarian crises? I address these questions by drawing on the theory of cascading failure in social network analysis by applying it to four prominent cases of forced migration requiring large influxes of emergency humanitarian assistance. These regional cases represent increasing degrees of reliance on U.S. contributions to humanitarian response for displaced Venezuelans, Syrians, and Rohingyas, as well as the mixed-migration into Europe. Drawing on the results of the network analysis from these cases, I conclude two things. Firstly, I find, largely, humanitarian aid networks which receive a majority of their funding from the U.S. are extremely prone to collapse in the unlikely circumstance that the U.S. significantly reduces or withdraws funding. Secondly, networks which have more diversified sources of funding are less prone to collapse if a major donor “fails,” or reduces/withdraws funding. Overall, this study speaks to a larger conversation about the importance of humanitarian aid networks becoming more resilient to catastrophic shocks to the system that may come as a result of shifting sources of governmental humanitarian assistance. As the global community, and especially the United States, progress through a period of uncertainty and instability, insights on how to maintain the critical flow of aid to humanitarian crises have become all the more important

Too Interconnected To Fail: Financial Contagion and Systemic Risk in Network Model of CDS and Other Credit Enhancement Obligations of US Banks

Credit default swaps (CDS) which constitute up to 98% of credit derivatives have had a unique, endemic and pernicious role to play in the current financial crisis. However, there are few in depth empirical studies of the financial network interconnections among banks and between banks and nonbanks involved as CDS protection buyers and protection sellers. The ongoing problems related to technical insolvency of US commercial banks is not just confined to the so called legacy/toxic RMBS assets on balance sheets but also because of their credit risk exposures from SPVs (Special Purpose Vehicles) and the CDS markets. The dominance of a few big players in the chains of insurance and reinsurance for CDS credit risk mitigation for banks� assets has led to the idea of �too interconnected to fail� resulting, as in the case of AIG, of having to maintain the fiction of non-failure in order to avert a credit event that can bring down the CDS pyramid and the financial system. This paper also includes a brief discussion of the complex system Agent-based Computational Economics (ACE) approach to financial network modeling for systemic risk assessment. Quantitative analysis is confined to the empirical reconstruction of the US CDS network based on the FDIC Q4 2008 data in order to conduct a series of stress tests that investigate the consequences of the fact that top 5 US banks account for 92% of the US bank activity in the $34 tn global gross notional value of CDS for Q4 2008 (see, BIS and DTCC). The May-Wigner stability condition for networks is considered for the hub like dominance of a few financial entities in the US CDS structures to understand the lack of robustness. We provide a Systemic Risk Ratio and an implementation of concentration risk in CDS settlement for major US banks in terms of the loss of aggregate core capital. We also compare our stress test results with those provided by SCAP (Supervisory Capital Assessment Program). Finally, in the context of the Basel II credit risk transfer and synthetic securitization framework, there is little evidence that the CDS market predicated on a system of offsets to minimize final settlement can provide the credit risk mitigation sought by banks for reference assets in the case of a significant credit event. The large negative externalities that arise from a lack of robustness of the CDS financial network from the demise of a big CDS seller undermines the justification in Basel II that banks be permitted to reduce capital on assets that have CDS guarantees. We recommend that the Basel II provision for capital reduction on bank assets that have CDS cover should be discontinued.

Too Interconnected To Fail: Financial Contagion and Systemic Risk In Network Model of CDS and Other Credit Enhancement Obligations of US Banks

Credit default swaps (CDS) which constitute up to 98% of credit derivatives have had a unique, endemic and pernicious role to play in the current financial crisis. However, there are few in depth empirical studies of the financial network interconnections among banks and between banks and nonbanks involved as CDS protection buyers and protection sellers. The ongoing problems related to technical insolvency of US commercial banks is not just confined to the so called legacy/toxic RMBS assets on balance sheets but also because of their credit risk exposures from SPVs (Special Purpose Vehicles) and the CDS markets. The dominance of a few big players in the chains of insurance and reinsurance for CDS credit risk mitigation for banks’ assets has led to the idea of “too interconnected to fail” resulting, as in the case of AIG, of having to maintain the fiction of non-failure in order to avert a credit event that can bring down the CDS pyramid and the financial system. This paper also includes a brief discussion of the complex system Agent-based Computational Economics (ACE) approach to financial network modeling for systemic risk assessment. Quantitative analysis is confined to the empirical reconstruction of the US CDS network based on the FDIC Q4 2008 data in order to conduct a series of stress tests that investigate the consequences of the fact that top 5 US banks account for 92% of the US bank activity in the $34 tn global gross notional value of CDS for Q4 2008 (see, BIS and DTCC). The May-Wigner stability condition for networks is considered for the hub like dominance of a few financial entities in the US CDS structures to understand the lack of robustness. We provide a Systemic Risk Ratio and an implementation of concentration risk in CDS settlement for major US banks in terms of the loss of aggregate core capital. We also compare our stress test results with those provided by SCAP (Supervisory Capital Assessment Program). Finally, in the context of the Basel II credit risk transfer and synthetic securitization framework, there is little evidence that the CDS market predicated on a system of offsets to minimize final settlement can provide the credit risk mitigation sought by banks for reference assets in the case of a significant credit event. The large negative externalities that arise from a lack of robustness of the CDS financial network from the demise of a big CDS seller undermines the justification in Basel II that banks be permitted to reduce capital on assets that have CDS guarantees. We recommend that the Basel II provision for capital reduction on bank assets that have CDS cover should be discontinued.Credit Default Swaps; Financial Networks; Systemic Risk; Agent BasedCredit Default Swaps, Financial Networks, Systemic Risk, Agent Based Models, Complex Systems, Stress Testing

Too Interconnected To Fail: Financial Contagion and Systemic Risk in Network Model of CDS and Other Credit Enhancement Obligations of US Banks

Credit default swaps (CDS) which constitute up to 98 of credit derivatives have had a unique, endemic and pernicious role to play in the current financial crisis. However, there are few in depth empirical studies of the financial network interconnections among banks and between banks and nonbanks involved as CDS protection buyers and protection sellers. The ongoing problems related to technical insolvency of US commercial banks is not just confined to the so called legacy/toxic RMBS assets on balance sheets but also because of their credit risk exposures from SPVs (Special Purpose Vehicles) and the CDS markets. The dominance of a few big players in the chains of insurance and reinsurance for CDS credit risk mitigation for banks’ assets has led to the idea of “too interconnected to fail” resulting, as in the case of AIG, of having to maintain the fiction of non-failure in order to avert a credit event that can bring down the CDS pyramid and the financial system. This paper also includes a brief discussion of the complex system Agent-based Computational Economics (ACE) approach to financial network modeling for systemic risk assessment. Quantitative analysis is confined to the empirical reconstruction of the US CDS network based on the FDIC Q4 2008 data in order to conduct a series of stress tests that investigate the consequences of the fact that top 5 US banks account for 92 of the US bank activity in the 34 tn global gross notional value of CDS for Q4 2008 (see, BIS and DTCC). The May-Wigner stability condition for networks is considered for the hub like dominance of a few financial entities in the US CDS structures to understand the lack of robustness. We provide a Systemic Risk Ratio and an implementation of concentration risk in CDS settlement for major US banks in terms of the loss of aggregate core capital. We also compare our stress test results with those provided by SCAP (Supervisory Capital Assessment Program). Finally, in the context of the Basel II credit risk transfer and synthetic securitization framework, there is little evidence that the CDS market predicated on a system of offsets to minimize final settlement can provide the credit risk mitigation sought by banks for reference assets in the case of a significant credit event. The large negative externalities that arise from a lack of robustness of the CDS financial network from the demise of a big CDS seller undermines the justification in Basel II that banks be permitted to reduce capital on assets that have CDS guarantees. We recommend that the Basel II provision for capital reduction on bank assets that have CDS cover should be discontinued

Community Structure in the United States House of Representatives

We investigate the networks of committee and subcommittee assignments in the United States House of Representatives from the 101st--108th Congresses, with the committees connected by ``interlocks'' or common membership. We examine the community structure in these networks using several methods, revealing strong links between certain committees as well as an intrinsic hierarchical structure in the House as a whole. We identify structural changes, including additional hierarchical levels and higher modularity, resulting from the 1994 election, in which the Republican party earned majority status in the House for the first time in more than forty years. We also combine our network approach with analysis of roll call votes using singular value decomposition to uncover correlations between the political and organizational structure of House committees.Comment: 44 pages, 13 figures (some with multiple parts and most in color), 9 tables, to appear in Physica A; new figures and revised discussion (including extra introductory material) for this versio

Delay propagation – new metrics, new insights

Network delay propagation is intimately linked with the challenges of managing passenger itineraries and corresponding connections. Airline decision-making governing these processes is driven by operational and regulatory factors. Using the first European network simulation model with explicit passenger itineraries and full delay cost estimations, we explore these factors through various flight and passenger prioritisation rules, assessing the performance impacts. Delay propagation is further characterised under the different prioritisation rules using complexity science techniques such as percolation theory and network attack. The relative effects of randomised and targeted disruption are compared

Institutions, Information, and Trade Policy in Times of Crisis

The paper examines the role of international institutions in preventing the rise of protectionism in times of times of crisis. Economic crisis exacerbates uncertainty in the conduct of commercial relations and thus makes it more likely for countries to resort to "beggar-thy-neighbor" trade policies. The historical record of the Great Depression supports this argument, where global trade suffered a downward spiral as governments pursued protectionist trade policies as a response to domestic pressures. This paper argues that the current era of globalization is distinguishable from its earlier counterparts by the presence of an extensive network of international institutions, which serve as conveyors of information that help to mitigate the information problem that prevails in prisoner‘s dilemma settings. Specifically, international institutions such as the WTO, preferential trade agreements (PTAs) and other international economic organizations increase the flow of information among countries. In doing so, they alleviate coordination problems as well as facilitate the detection of violations in commitments to maintaining a liberal trade regime. We suggest that this mechanism may explain why the current crisis is not replicating the pattern of the Great Depression. Moreover, we explore the combined effect of membership in international organization and political variables, the latter including democracy, veto players, partisanship of government, and government effectiveness. We test this argument using a newly-compiled dataset of trade policies during the current economic crisis and membership in international organizations. The paper finds strong support for the informational role of international institutions as a key factor preventing the rise of protectionism in times of crisis. Conversely, there is mixed evidence that the combining effect of international organizations and domestic political variables matters in explaining protectionism during this crisis