Credit default swaps networks and systemic risk

Credit Default Swaps (CDS) spreads should reflect default risk of the underlying corporate debt. Actually, it has been recognized that CDS spread time series did not anticipate but only followed the increasing risk of default before the financial crisis. In principle, the network of correlations among CDS spread time series could at least display some form of structural change to be used as an early warning of systemic risk. Here we study a set of 176 CDS time series of financial institutions from 2002 to 2011. Networks are constructed in various ways, some of which display structural change at the onset of the credit crisis of 2008, but never before. By taking these networks as a proxy of interdependencies among financial institutions, we run stress-test based on Group DebtRank. Systemic risk before 2008 increases only when incorporating a macroeconomic indicator reflecting the potential losses of financial assets associated with house prices in the US. This approach indicates a promising way to detect systemic instabilities

Breaking Down the Lockdown: The Causal Effects of Stay-At-Home Mandates on Uncertainty and Sentiments During the COVID-19 Pandemic

We study the causal effects of lockdown measures on uncertainty and sentiment on Twitter. To this end, we exploit the quasi-experimental framework created by the first COVID-19 lockdown in a high-income economy--the unexpected Italian lockdown in February 2020. We measure changes in public sentiment using deep learning and dictionary-based methods on the text of daily tweets geolocated within and near the locked-down areas, before and after the treatment. We classify tweets into four categories--economics, health, politics, and lockdown policy--to examine how the policy affected emotions heterogeneously. Using a staggered difference-in-differences approach, we show that the lockdown did not have a significantly robust impact on economic uncertainty and sentiment. However, the policy came at the price of higher uncertainty on health and politics and more negative political sentiments. These results, which are robust to a battery of robustness tests, show that lockdowns have relevant non-health related implications

Twitter-based analysis of the dynamics of collective attention to political parties

Large-scale data from social media have a significant potential to describe complex phenomena in the real world and to anticipate collective behaviors such as information spreading and social trends. One specific case of study is represented by the collective attention to the action of political parties. Not surprisingly, researchers and stakeholders tried to correlate parties' presence on social media with their performances in elections. Despite the many efforts, results are still inconclusive since this kind of data is often very noisy and significant signals could be covered by (largely unknown) statistical fluctuations. In this paper we consider the number of tweets (tweet volume) of a party as a proxy of collective attention to the party, identify the dynamics of the volume, and show that this quantity has some information on the election outcome. We find that the distribution of the tweet volume for each party follows a log-normal distribution with a positive autocorrelation of the volume over short terms, which indicates the volume has large fluctuations of the log-normal distribution yet with a short-term tendency. Furthermore, by measuring the ratio of two consecutive daily tweet volumes, we find that the evolution of the daily volume of a party can be described by means of a geometric Brownian motion (i.e., the logarithm of the volume moves randomly with a trend). Finally, we determine the optimal period of averaging tweet volume for reducing fluctuations and extracting short-term tendencies. We conclude that the tweet volume is a good indicator of parties' success in the elections when considered over an optimal time window. Our study identifies the statistical nature of collective attention to political issues and sheds light on how to model the dynamics of collective attention in social media

DebtRank: Too central to fail? Financial networks, the FED and systemic risk

Systemic risk, here meant as the risk of default of a large portion of the financial system, depends on the network of financial exposures among institutions. However, there is no widely accepted methodology to determine the systemically important nodes in a network. To fill this gap, we introduce, DebtRank, a novel measure of systemic impact inspired by feedback-centrality. As an application, we analyse a new and unique dataset on the USD 1.2 trillion FED emergency loans program to global financial institutions during 2008g-2010. We find that a group of 22 institutions, which received most of the funds, form a strongly connected graph where each of the nodes becomes systemically important at the peak of the crisis. Moreover, a systemic default could have been triggered even by small dispersed shocks. The results suggest that the debate on too-big-to-fail institutions should include the even more serious issue of too-central-to-fail

Regional climate models' performance in representing precipitation and temperature over selected Mediterranean areas

This paper discusses the relative performance of several climate models in providing reliable forcing for hydrological modeling in six representative catchments in the Mediterranean region. We consider 14 Regional Climate Models (RCMs), from the EU-FP6 ENSEMBLES project, run for the A1B emission scenario on a common 0.22° (about 24 km) rotated grid over Europe and the Mediterranean region. In the validation period (1951 to 2010) we consider daily precipitation and surface temperatures from the observed data fields (E-OBS) data set, available from the ENSEMBLES project and the data providers in the ECA&D project. Our primary objective is to rank the 14 RCMs for each catchment and select the four best-performing ones to use as common forcing for hydrological models in the six Mediterranean basins considered in the EU-FP7 CLIMB project. Using a common suite of four RCMs for all studied catchments reduces the (epistemic) uncertainty when evaluating trends and climate change impacts in the 21st century. We present and discuss the validation setting, as well as the obtained results and, in some detail, the difficulties we experienced when processing the data. In doing so we also provide useful information and advice for researchers not directly involved in climate modeling, but interested in the use of climate model outputs for hydrological modeling and, more generally, climate change impact studies in the Mediterranean region

A Multi-Level Geographical Study of Italian Political Elections from Twitter Data

In this paper we present an analysis of the behavior of Italian Twitter users during national political elections. We monitor the volumes of the tweets related to the leaders of the various political parties and we compare them to the elections results. Furthermore, we study the topics that are associated with the co-occurrence of two politicians in the same tweet. We cannot conclude, from a simple statistical analysis of tweet volume and their time evolution, that it is possible to precisely predict the election outcome (or at least not in our case of study that was characterized by a "too-close-to-call'' scenario). On the other hand, we found that the volume of tweets and their change in time provide a very good proxy of the final results. We present this analysis both at a national level and at smaller levels, ranging from the regions composing the country to macro-areas (North, Center, South).In this paper we present an analysis of the behavior of Italian Twitter users during national political elections. We monitor the volumes of the tweets related to the leaders of the various political parties and we compare them to the elections results. Furthermore, we study the topics that are associated with the co-occurrence of two politicians in the same tweet. We cannot conclude, from a simple statistical analysis of tweet volume and their time evolution, that it is possible to precisely predict the election outcome (or at least not in our case of study that was characterized by a "too-close-to-call" scenario). On the other hand, we found that the volume of tweets and their change in time provide a very good proxy of the final results. We present this analysis both at a national level and at smaller levels, ranging from the regions composing the country to macro-areas (North, Center, South). © 2014 Caldarelli et al

Twitter-based analysis of the dynamics of collective attention to political parties

Large-scale data from social media have a significant potential to describe complex phenomena in real world and to anticipate collective behaviors such as information spreading and social trends. One specific case of study is represented by the collective attention to the action of political parties. Not surprisingly, researchers and stakeholders tried to correlate parties' presence on social media with their performances in elections. Despite the many efforts, results are still inconclusive since this kind of data is often very noisy and significant signals could be covered by (largely unknown) statistical fluctuations. In this paper we consider the number of tweets (tweet volume) of a party as a proxy of collective attention to the party, identify the dynamics of the volume, and show that this quantity has some information on the elections outcome. We find that the distribution of the tweet volume for each party follows a log-normal distribution with a positive autocorrelation of the volume over short terms, which indicates the volume has large fluctuations of the log-normal distribution yet with a short-term tendency. Furthermore, by measuring the ratio of two consecutive daily tweet volumes, we find that the evolution of the daily volume of a party can be described by means of a geometric Brownian motion (i.e., the logarithm of the volume moves randomly with a trend). Finally, we determine the optimal period of averaging tweet volume for reducing fluctuations and extracting short-term tendencies. We conclude that the tweet volume is a good indicator of parties' success in the elections when considered over an optimal time window. Our study identifies the statistical nature of collective attention to political issues and sheds light on how to model the dynamics of collective attention in social media.Comment: 16 pages, 7 figures, 3 tables. Published in PLoS ON

Global value trees

The fragmentation of production across countries has become an important feature of the globalization in recent decades and is often conceptualized by the term “global value chains” (GVCs). When empirically investigating the GVCs, previous studies are mainly interested in knowing how global the GVCs are rather than how the GVCs look like. From a complex networks perspective, we use the World Input-Output Database (WIOD) to study the evolution of the global production system. We find that the industry-level GVCs are indeed not chain-like but are better characterized by the tree topology. Hence, we compute the global value trees (GVTs) for all the industries available in the WIOD. Moreover, we compute an industry importance measure based on the GVTs and compare it with other network centrality measures. Finally, we discuss some future applications of the GVTs