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dc.contributor.authorDehmamy, Nimaen_US
dc.contributor.authorBuldyrev, Sergey V.en_US
dc.contributor.authorHavlin, Shlomoen_US
dc.contributor.authorStanley, Harry Eugeneen_US
dc.contributor.authorVodenska, Irenaen_US
dc.date.accessioned2020-04-01T18:10:44Z
dc.date.available2020-04-01T18:10:44Z
dc.date.issued2014-10-01
dc.identifierhttp://arxiv.org/abs/1410.0104v2
dc.identifier.citationNima Dehmamy, Sergey V Buldyrev, Shlomo Havlin, H Eugene Stanley, Irena Vodenska. 2014. "Classical mechanics of economic networks." http://arxiv.org/abs/1410.0104v2
dc.identifier.urihttps://hdl.handle.net/2144/39925
dc.description.abstractFinancial networks are dynamic. To assess their systemic importance to the world-wide economic network and avert losses we need models that take the time variations of the links and nodes into account. Using the methodology of classical mechanics and Laplacian determinism we develop a model that can predict the response of the financial network to a shock. We also propose a way of measuring the systemic importance of the banks, which we call BankRank. Using European Bank Authority 2011 stress test exposure data, we apply our model to the bipartite network connecting the largest institutional debt holders of the troubled European countries (Greece, Italy, Portugal, Spain, and Ireland). From simulating our model we can determine whether a network is in a "stable" state in which shocks do not cause major losses, or a "unstable" state in which devastating damages occur. Fitting the parameters of the model, which play the role of physical coupling constants, to Eurozone crisis data shows that before the Eurozone crisis the system was mostly in a "stable" regime, and that during the crisis it transitioned into an "unstable" regime. The numerical solutions produced by our model match closely the actual time-line of events of the crisis. We also find that, while the largest holders are usually more important, in the unstable regime smaller holders also exhibit systemic importance. Our model also proves useful for determining the vulnerability of banks and assets to shocks. This suggests that our model may be a useful tool for simulating the response dynamics of shared portfolio networks.en_US
dc.language.isoen_US
dc.subjectRisk managementen_US
dc.titleClassical mechanics of economic networksen_US
dc.typeArticleen_US
dc.description.versionPublished versionen_US
pubs.elements-sourcemanual-entryen_US
pubs.notesEmbargo: Not knownen_US
pubs.organisational-groupBoston Universityen_US
pubs.organisational-groupBoston University, College of Arts & Sciencesen_US
pubs.organisational-groupBoston University, College of Arts & Sciences, Department of Physicsen_US
pubs.organisational-groupBoston University, Metropolitan Collegeen_US
pubs.publication-statusPublisheden_US
dc.identifier.orcid0000-0003-1183-7941 (Vodenska, Irena)
dc.identifier.mycv52746


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