Early-warning signals of topological collapse in interbank networks

The financial crisis clearly illustrated the importance of characterizing the level of 'systemic' risk associated with an entire credit network, rather than with single institutions. However, the interplay between financial distress and topological changes is still poorly understood. Here we analyze the quarterly interbank exposures among Dutch banks over the period 1998-2008, ending with the crisis. After controlling for the link density, many topological properties display an abrupt change in 2008, providing a clear - but unpredictable - signature of the crisis. By contrast, if the heterogeneity of banks' connectivity is controlled for, the same properties show a gradual transition to the crisis, starting in 2005 and preceded by an even earlier period during which anomalous debt loops could have led to the underestimation of counter-party risk. These early-warning signals are undetectable if the network is reconstructed from partial bank-specific data, as routinely done. We discuss important implications for bank regulatory policies.Comment: 28 pages, 23 figures, 1 tabl

A Relational Hyperlink Analysis of an Online Social Movement

In this paper we propose relational hyperlink analysis (RHA) as a distinct approach for empirical social science research into hyperlink networks on the World Wide Web. We demonstrate this approach, which employs the ideas and techniques of social network analysis (in particular, exponential random graph modeling), in a study of the hyperlinking behaviors of Australian asylum advocacy groups. We show that compared with the commonly-used hyperlink counts regression approach, relational hyperlink analysis can lead to fundamentally different conclusions about the social processes underpinning hyperlinking behavior. In particular, in trying to understand why social ties are formed, counts regressions may over-estimate the role of actor attributes in the formation of hyperlinks when endogenous, purely structural network effects are not taken into account. Our analysis involves an innovative joint use of two software programs: VOSON, for the automated retrieval and processing of considerable quantities of hyperlink data, and LPNet, for the statistical modeling of social network data. Together, VOSON and LPNet enable new and unique research into social networks in the online world, and our paper highlights the importance of complementary research tools for social science research into the web

Directed closure coefficient and its patterns.

The triangle structure, being a fundamental and significant element, underlies many theories and techniques in studying complex networks. The formation of triangles is typically measured by the clustering coefficient, in which the focal node is the centre-node in an open triad. In contrast, the recently proposed closure coefficient measures triangle formation from an end-node perspective and has been proven to be a useful feature in network analysis. Here, we extend it by proposing the directed closure coefficient that measures the formation of directed triangles. By distinguishing the direction of the closing edge in building triangles, we further introduce the source closure coefficient and the target closure coefficient. Then, by categorising particular types of directed triangles (e.g., head-of-path), we propose four closure patterns. Through multiple experiments on 24 directed networks from six domains, we demonstrate that at network-level, the four closure patterns are distinctive features in classifying network types, while at node-level, adding the source and target closure coefficients leads to significant improvement in link prediction task in most types of directed networks