106 research outputs found
The organization of the interbank network and how ECB unconventional measures affected the e-MID overnight market
The topological properties of interbank networks have been discussed widely
in the literature mainly because of their relevance for systemic risk. Here we
propose to use the Stochastic Block Model to investigate and perform a model
selection among several possible two block organizations of the network: these
include bipartite, core-periphery, and modular structures. We apply our method
to the e-MID interbank market in the period 2010-2014 and we show that in
normal conditions the most likely network organization is a bipartite
structure. In exceptional conditions, such as after LTRO, one of the most
important unconventional measures by ECB at the beginning of 2012, the most
likely structure becomes a random one and only in 2014 the e-MID market went
back to a normal bipartite organization. By investigating the strategy of
individual banks, we explore possible explanations and we show that the
disappearance of many lending banks and the strategy switch of a very small set
of banks from borrower to lender is likely at the origin of this structural
change.Comment: 33 pages, 5 figure
Centrality metrics and localization in core-periphery networks
Two concepts of centrality have been defined in complex networks. The first
considers the centrality of a node and many different metrics for it has been
defined (e.g. eigenvector centrality, PageRank, non-backtracking centrality,
etc). The second is related to a large scale organization of the network, the
core-periphery structure, composed by a dense core plus an outlying and
loosely-connected periphery. In this paper we investigate the relation between
these two concepts. We consider networks generated via the Stochastic Block
Model, or its degree corrected version, with a strong core-periphery structure
and we investigate the centrality properties of the core nodes and the ability
of several centrality metrics to identify them. We find that the three measures
with the best performance are marginals obtained with belief propagation,
PageRank, and degree centrality, while non-backtracking and eigenvector
centrality (or MINRES}, showed to be equivalent to the latter in the large
network limit) perform worse in the investigated networks.Comment: 15 pages, 8 figure
Eigenvalue and Eigenvector Statistics in Time Series Analysis
The study of correlated time-series is ubiquitous in statistical analysis,
and the matrix decomposition of the cross-correlations between time series is a
universal tool to extract the principal patterns of behavior in a wide range of
complex systems. Despite this fact, no general result is known for the
statistics of eigenvectors of the cross-correlations of correlated time-series.
Here we use supersymmetric theory to provide novel analytical results that will
serve as a benchmark for the study of correlated signals for a vast community
of researchers.Comment: 8 pages, 3 figure
Tackling information asymmetry in networks: a new entropy-based ranking index
Information is a valuable asset for agents in socio-economic systems, a
significant part of the information being entailed into the very network of
connections between agents. The different interlinkages patterns that agents
establish may, in fact, lead to asymmetries in the knowledge of the network
structure; since this entails a different ability of quantifying relevant
systemic properties (e.g. the risk of financial contagion in a network of
liabilities), agents capable of providing a better estimate of (otherwise)
unaccessible network properties, ultimately have a competitive advantage. In
this paper, we address for the first time the issue of quantifying the
information asymmetry arising from the network topology. To this aim, we define
a novel index - InfoRank - intended to measure the quality of the information
possessed by each node, computing the Shannon entropy of the ensemble
conditioned on the node-specific information. Further, we test the performance
of our novel ranking procedure in terms of the reconstruction accuracy of the
(unaccessible) network structure and show that it outperforms other popular
centrality measures in identifying the "most informative" nodes. Finally, we
discuss the socio-economic implications of network information asymmetry.Comment: 12 pages, 8 figure
Resolution of ranking hierarchies in directed networks
Identifying hierarchies and rankings of nodes in directed graphs is
fundamental in many applications such as social network analysis, biology,
economics, and finance. A recently proposed method identifies the hierarchy by
finding the ordered partition of nodes which minimises a score function, termed
agony. This function penalises the links violating the hierarchy in a way
depending on the strength of the violation. To investigate the resolution of
ranking hierarchies we introduce an ensemble of random graphs, the Ranked
Stochastic Block Model. We find that agony may fail to identify hierarchies
when the structure is not strong enough and the size of the classes is small
with respect to the whole network. We analytically characterise the resolution
threshold and we show that an iterated version of agony can partly overcome
this resolution limit.Comment: 27 pages, 9 figure
A dynamic network model with persistent links and node-specific latent variables, with an application to the interbank market
We propose a dynamic network model where two mechanisms control the
probability of a link between two nodes: (i) the existence or absence of this
link in the past, and (ii) node-specific latent variables (dynamic fitnesses)
describing the propensity of each node to create links. Assuming a Markov
dynamics for both mechanisms, we propose an Expectation-Maximization algorithm
for model estimation and inference of the latent variables. The estimated
parameters and fitnesses can be used to forecast the presence of a link in the
future. We apply our methodology to the e-MID interbank network for which the
two linkage mechanisms are associated with two different trading behaviors in
the process of network formation, namely preferential trading and trading
driven by node-specific characteristics. The empirical results allow to
recognise preferential lending in the interbank market and indicate how a
method that does not account for time-varying network topologies tends to
overestimate preferential linkage.Comment: 19 pages, 6 figure
Heterogeneous Retirement Savings Strategy Selection with Reinforcement Learning
Saving and investment behaviour is crucial for all individuals to guarantee their welfare during work-life and retirement. We introduce a deep reinforcement learning model in which agents learn optimal portfolio allocation and saving strategies suitable for their heterogeneous profiles. The environment is calibrated with occupation- and age-dependent income dynamics. The research focuses on heterogeneous income trajectories dependent on agents’ profiles and incorporates the parameterisation of agents’ behaviours. The model provides a new flexible methodology to estimate lifetime consumption and investment choices for individuals with heterogeneous profiles
Deep recurrent modelling of Granger causality with latent confounding
Inferring causal relationships in observational time series data is an
important task when interventions cannot be performed. Granger causality is a
popular framework to infer potential causal mechanisms between different time
series. The original definition of Granger causality is restricted to linear
processes and leads to spurious conclusions in the presence of a latent
confounder. In this work, we harness the expressive power of recurrent neural
networks and propose a deep learning-based approach to model non-linear Granger
causality by directly accounting for latent confounders. Our approach leverages
multiple recurrent neural networks to parameterise predictive distributions and
we propose the novel use of a dual-decoder setup to conduct the Granger tests.
We demonstrate the model performance on non-linear stochastic time series for
which the latent confounder influences the cause and effect with different time
lags; results show the effectiveness of our model compared to existing
benchmarks
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