network analysis of the hungarian interbank lending market edina berlinger, bce gergely daroczi,...
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![Page 1: Network analysis of the Hungarian interbank lending market Edina Berlinger, BCE Gergely Daroczi, CARD.com R/Finance 2015 May 29 & 30, Chicago, IL, USA](https://reader035.vdocuments.net/reader035/viewer/2022081417/56649d6e5503460f94a4fff3/html5/thumbnails/1.jpg)
Network analysis of the Hungarian interbank
lending market
Edina Berlinger, BCEGergely Daroczi, CARD.com
R/Finance 2015May 29 & 30, Chicago, IL, USA
![Page 2: Network analysis of the Hungarian interbank lending market Edina Berlinger, BCE Gergely Daroczi, CARD.com R/Finance 2015 May 29 & 30, Chicago, IL, USA](https://reader035.vdocuments.net/reader035/viewer/2022081417/56649d6e5503460f94a4fff3/html5/thumbnails/2.jpg)
Importance
• Partner riskLoans without collateral
• Systemic riskLarge banks act as intermediary
• Pre-crisis regulationEarly warning system on SIFIs
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Data
• National Bank of Hungary• Jan 2003 – Jan 2012 (including Sept 2008)• 55 Hungarian banks• 92,619 interbank lending transactions:– Lender– Borrower– Loan amount– Interest rate– Maturity– Date
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Monthly aggregationLender Borrower Amount Date
1 2 10 Jan 20131 3 5 Jan 20132 1 5 Jan 20132 3 8 Jan 20133 1 5 Jan 20133 2 12 Jan 2013
1 6 4 Jan 20131 4 8 Jan 20132 4 8 Jan 20136 2 6 Jan 20139 1 15 Jan 20135 2 5 Jan 20137 6 2 Jan 20134 8 42 Jan 2013
![Page 5: Network analysis of the Hungarian interbank lending market Edina Berlinger, BCE Gergely Daroczi, CARD.com R/Finance 2015 May 29 & 30, Chicago, IL, USA](https://reader035.vdocuments.net/reader035/viewer/2022081417/56649d6e5503460f94a4fff3/html5/thumbnails/5.jpg)
Factors contributing tosystemic risk
• Size• Interconnectedness• Lack of substitutes• Cross-juridictional activity• Complexity of the activities
Basel Committee on Banking Supervision (2011)
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Total volume
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Average amount
![Page 8: Network analysis of the Hungarian interbank lending market Edina Berlinger, BCE Gergely Daroczi, CARD.com R/Finance 2015 May 29 & 30, Chicago, IL, USA](https://reader035.vdocuments.net/reader035/viewer/2022081417/56649d6e5503460f94a4fff3/html5/thumbnails/8.jpg)
Interest rate
![Page 9: Network analysis of the Hungarian interbank lending market Edina Berlinger, BCE Gergely Daroczi, CARD.com R/Finance 2015 May 29 & 30, Chicago, IL, USA](https://reader035.vdocuments.net/reader035/viewer/2022081417/56649d6e5503460f94a4fff3/html5/thumbnails/9.jpg)
Number of transactions
![Page 10: Network analysis of the Hungarian interbank lending market Edina Berlinger, BCE Gergely Daroczi, CARD.com R/Finance 2015 May 29 & 30, Chicago, IL, USA](https://reader035.vdocuments.net/reader035/viewer/2022081417/56649d6e5503460f94a4fff3/html5/thumbnails/10.jpg)
Factors contributing to systemic risk
• Size• Interconnectedness• Lack of substitutes • Cross-juridictional activity• Complexity of the activities
Basel Committee on Banking Supervision (2011)
![Page 11: Network analysis of the Hungarian interbank lending market Edina Berlinger, BCE Gergely Daroczi, CARD.com R/Finance 2015 May 29 & 30, Chicago, IL, USA](https://reader035.vdocuments.net/reader035/viewer/2022081417/56649d6e5503460f94a4fff3/html5/thumbnails/11.jpg)
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Introduction to network analysisLender Borrower Amount Date
1 2 10 Jan 20131 3 5 Jan 20132 1 5 Jan 20132 3 8 Jan 20133 1 5 Jan 20133 2 12 Jan 2013
1 6 4 Jan 20131 4 8 Jan 20132 4 8 Jan 20136 2 6 Jan 20139 1 15 Jan 20135 2 5 Jan 20137 6 2 Jan 20134 8 42 Jan 2013
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Introduction to network analysis
![Page 14: Network analysis of the Hungarian interbank lending market Edina Berlinger, BCE Gergely Daroczi, CARD.com R/Finance 2015 May 29 & 30, Chicago, IL, USA](https://reader035.vdocuments.net/reader035/viewer/2022081417/56649d6e5503460f94a4fff3/html5/thumbnails/14.jpg)
SNA centrality metrics• Density• Degree in/out• Betweeness• Closeness• Transitivity• Average path lenth• Eigenvalue
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Average density
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Average degree
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Average betweenness
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Average closeness
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Interconnectedness
• General network centrality metrics• Core/periphery models– Binary– Three layers– Continuous– Symmetric or asymmetric
• Simulation, infection models
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Core, semi-periphery, periphery
1. Define every node as semi-periphery2. Define all non-connected nodes as exit3. Look for largest complete sub-graph of
a) the directed graphb) the undirected graph (if 3a failed)c) core nodes found
4. Temporarily merge all core nodes into one5. Look for the largest sets of independent nodes
a) remove sets which include the core nodeb) if empty, repeat 5 for smaller sets of independent nodesc) choose the set(s) with the minimal degreed) sample (if multiple sets found)e) periphery nodes found
![Page 21: Network analysis of the Hungarian interbank lending market Edina Berlinger, BCE Gergely Daroczi, CARD.com R/Finance 2015 May 29 & 30, Chicago, IL, USA](https://reader035.vdocuments.net/reader035/viewer/2022081417/56649d6e5503460f94a4fff3/html5/thumbnails/21.jpg)
Introduction to network analysisLender Borrower Amount Date
1 2 10 Jan 20131 3 5 Jan 20132 1 5 Jan 20132 3 8 Jan 20133 1 5 Jan 20133 2 12 Jan 2013
1 6 4 Jan 20131 4 8 Jan 20132 4 8 Jan 20136 2 6 Jan 20139 1 15 Jan 20135 2 5 Jan 20137 6 2 Jan 20134 8 42 Jan 2013
![Page 22: Network analysis of the Hungarian interbank lending market Edina Berlinger, BCE Gergely Daroczi, CARD.com R/Finance 2015 May 29 & 30, Chicago, IL, USA](https://reader035.vdocuments.net/reader035/viewer/2022081417/56649d6e5503460f94a4fff3/html5/thumbnails/22.jpg)
Introduction to network analysis
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Every node is semi-periphery
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Non-connecting nodes
![Page 25: Network analysis of the Hungarian interbank lending market Edina Berlinger, BCE Gergely Daroczi, CARD.com R/Finance 2015 May 29 & 30, Chicago, IL, USA](https://reader035.vdocuments.net/reader035/viewer/2022081417/56649d6e5503460f94a4fff3/html5/thumbnails/25.jpg)
Largest complete sub-graph
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Largest set of independent nodes
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Coreness: before the Lehman-fall
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Coreness: after the Lehman-fall
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Coreness and degree
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Average degree
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Coreness and closeness
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Coreness and betweeness
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R packages
• data.table (1.9.4)• reshape2 (0.8.5)• ggplot2 (1.0.1)• RColorBrewer (1.1-2)• igraph (0.7.1)• shiny (0.12.0)• visNetwork (0.0.3)• pander (0.5.3)
Q&A
Edina [email protected]
Gergely Daroczigergely.daroczi@
card.com
@daroczig Hungary, 2014