Nestedness and systemic risk in financial networks
In this paper, we explore the relationship between node nestedness contribution and network stability in financial networks. We rely on data from the Brazilian interbank market. For each bank in the network, we computed the individual nestedness contribution (INC), along with two measures of systemi...
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| Format: | Article |
| Language: | English |
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Elsevier
2025-06-01
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| Series: | Latin American Journal of Central Banking |
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| Online Access: | http://www.sciencedirect.com/science/article/pii/S2666143824000188 |
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| author | Michel Alexandre Felipe Jordão Xavier Thiago Christiano Silva Francisco A. Rodrigues |
| author_facet | Michel Alexandre Felipe Jordão Xavier Thiago Christiano Silva Francisco A. Rodrigues |
| author_sort | Michel Alexandre |
| collection | DOAJ |
| description | In this paper, we explore the relationship between node nestedness contribution and network stability in financial networks. We rely on data from the Brazilian interbank market. For each bank in the network, we computed the individual nestedness contribution (INC), along with two measures of systemic risk: systemic impact (SI) and systemic vulnerability (SV). The INC is computed considering the different roles played by the banks: lender and borrower. We found that borrowing banks with a higher INC would cause more damage to the network if they were hit by a shock — i.e, they have a higher SI. Moreover, lending banks with a higher INC are more vulnerable to shocks on the network. |
| format | Article |
| id | doaj-art-e9df138a0fe94679b9488886acd3dca6 |
| institution | OA Journals |
| issn | 2666-1438 |
| language | English |
| publishDate | 2025-06-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Latin American Journal of Central Banking |
| spelling | doaj-art-e9df138a0fe94679b9488886acd3dca62025-08-20T02:17:09ZengElsevierLatin American Journal of Central Banking2666-14382025-06-016210013610.1016/j.latcb.2024.100136Nestedness and systemic risk in financial networksMichel Alexandre0Felipe Jordão Xavier1Thiago Christiano Silva2Francisco A. Rodrigues3Research Department, Central Bank of Brazil, Brazil; Department of Economics, University of São Paulo, SBS Q3, Bloco B, 70074-900, Brasília, Brazil; Corresponding author at: Research Department, Central Bank of Brazil, Brazil.Institute of Mathematics and Computer Science, University of São Paulo, BrazilResearch Department, Central Bank of Brazil, Brazil; Universidade Católica de Brasília, BrazilInstitute of Mathematics and Computer Science, University of São Paulo, BrazilIn this paper, we explore the relationship between node nestedness contribution and network stability in financial networks. We rely on data from the Brazilian interbank market. For each bank in the network, we computed the individual nestedness contribution (INC), along with two measures of systemic risk: systemic impact (SI) and systemic vulnerability (SV). The INC is computed considering the different roles played by the banks: lender and borrower. We found that borrowing banks with a higher INC would cause more damage to the network if they were hit by a shock — i.e, they have a higher SI. Moreover, lending banks with a higher INC are more vulnerable to shocks on the network.http://www.sciencedirect.com/science/article/pii/S2666143824000188NestednessComplex networksSystemic riskFinancial networks |
| spellingShingle | Michel Alexandre Felipe Jordão Xavier Thiago Christiano Silva Francisco A. Rodrigues Nestedness and systemic risk in financial networks Latin American Journal of Central Banking Nestedness Complex networks Systemic risk Financial networks |
| title | Nestedness and systemic risk in financial networks |
| title_full | Nestedness and systemic risk in financial networks |
| title_fullStr | Nestedness and systemic risk in financial networks |
| title_full_unstemmed | Nestedness and systemic risk in financial networks |
| title_short | Nestedness and systemic risk in financial networks |
| title_sort | nestedness and systemic risk in financial networks |
| topic | Nestedness Complex networks Systemic risk Financial networks |
| url | http://www.sciencedirect.com/science/article/pii/S2666143824000188 |
| work_keys_str_mv | AT michelalexandre nestednessandsystemicriskinfinancialnetworks AT felipejordaoxavier nestednessandsystemicriskinfinancialnetworks AT thiagochristianosilva nestednessandsystemicriskinfinancialnetworks AT franciscoarodrigues nestednessandsystemicriskinfinancialnetworks |