Econophysics of Systemic Risk and Network Dynamics

Transcription

1 Econophysics of Systemic Risk and Network Dynamics

2 New Economic Windows Series Editors MARISA FAGGINI, MAURO GALLEGATI, ALAN P. KIRMAN Series Editorial Board Jaime Gil Aluja Departament d Economia i Organització d Empreses, Universitat de Barcelona, Barcelona, Spain Fortunato Arecchi Dipartimento di Fisica, Università degli Studi di Firenze and INOA, Florence, Italy David Colander Department of Economics, Middlebury College, Middlebury, VT, USA Richard H. Day Department of Economics, University of Southern California, Los Angeles, USA Steve Keen School of Economics and Finance, University of Western Sydney, Penrith, Australia Marji Lines Dipartimento di Scienze Statistiche, Università degli Studi di Udine, Udine, Italy Thomas Lux Department of Economics, University of Kiel, Kiel, Germany Alfredo Medio Dipartimento di Scienze Statistiche, Università degli Studi di Udine, Udine, Italy Paul Ormerod Directors of Environment Business-Volterra Consulting, London, UK Peter Richmond School of Physics, Trinity College, Dublin 2, Ireland J. Barkley Rosser Department of Economics, James Madison University, Harrisonburg, VA, USA Sorin Solomon Racah Institute of Physics, The Hebrew University of Jerusalem, Jerusalem, Israel Pietro Terna Dipartimento di Scienze Economiche e Finanziarie, Università degli Studi di Torino, Torino, Italy Kumaraswamy (Vela) Velupillai Department of Economics, National University of Ireland, Galway, Ireland Nicolas Vriend Department of Economics, Queen Mary University of London, London, UK Lotfi Zadeh Computer Science Division, University of California Berkeley, Berkeley, CA, USA Editorial Assistant: Anna Parziale Dipartimento di Studi Economici, Università degli Studi di Napoli Parthenope, Napoli, Italy For further volumes:

3 Frédéric Abergel Bikas K. Chakrabarti Anirban Chakraborti Asim Ghosh Editors Econophysics of Systemic Risk and Network Dynamics

4 Editors Frédéric Abergel Chaire de Finance Quantitative Laboratoire de Mathématiques Appliquées aux Systèmes ÉcoleCentraleParis Châtenay-Malabry, France Bikas K. Chakrabarti Theoretical Condensed Matter Physics Division Saha Institute of Nuclear Physics Kolkata, India; Economic Research Unit Indian Statistical Institute Kolkata, India Anirban Chakraborti Chaire de Finance Quantitative Laboratoire de Mathématiques Appliquées aux Systèmes ÉcoleCentraleParis Châtenay-Malabry, France Asim Ghosh Theoretical Condensed Matter Physics Division Saha Institute of Nuclear Physics Kolkata, India ISSN X ISSN (electronic) New Economic Windows ISBN ISBN (ebook) DOI / Springer Milan Heidelberg New York Dordrecht London Library of Congress Control Number: Springer-Verlag Italia 2013 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. Exempted from this legal reservation are brief excerpts in connection with reviews or scholarly analysis or material supplied specifically for the purpose of being entered and executed on a computer system, for exclusive use by the purchaser of the work. Duplication of this publication or parts thereof is permitted only under the provisions of the Copyright Law of the Publisher s location, in its current version, and permission for use must always be obtained from Springer. Permissions for use may be obtained through RightsLink at the Copyright Clearance Center. Violations are liable to prosecution under the respective Copyright Law. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. While the advice and information in this book are believed to be true and accurate at the date of publication, neither the authors nor the editors nor the publisher can accept any legal responsibility for any errors or omissions that may be made. The publisher makes no warranty, express or implied, with respect to the material contained herein. Printed on acid-free paper Springer is part of Springer Science+Business Media (

5 Preface Systemic risk has long been identified as a potential for financial institutions to trigger a dangerous contagion mechanism from the financial economy to the real economy itself. One of the commonly adopted definitions of systemic risk is: risk of disruption to the flow of financial services that is (i) caused by an impairment of all or parts of the financial system; and (ii) has the potential to have serious negative consequences for the real economy. Evident from this definition, or from any of its variants that one can find in the growing literature on the subject, are two characteristic aspects. The first one being that such a risk takes place at a much larger scale than that of an individual institution. The second one being that it eventually spreads to the real economy outside the financial system through various leakage mechanisms, of which the last crisis has given some examples: liquidity shrinkage, fire sale of assets, drop in market value of derivatives... This type of risk, long confined to the monetary market, has spread widely in the recent past, culminating in the subprime crisis of The understanding and control of systemic risk has therefore become an extremely important societal and economic question. Such problems are now extensively being studied by people from disciplines like economics, finance and physics. The contributions by physicists are relatively new. The Econophys-Kolkata VI conference, the 6th event in this series of international conferences, held during October last year, was dedicated to address and discuss extensively these issues and the recent developments. Like the last event in the series, this one was also organized jointly by the École Centrale Paris and the Saha Institute of Nuclear Physics, and was held at the Saha Institute of Nuclear Physics, Kolkata. This proceedings volume contains the written versions of most of the talks and seminars delivered by distinguished experts from all over the world, participating in the meeting, and accepted after refereeing. For some completeness in the cases of one or two important topics (like in the case Many-agent Games), some reviews, by experts who could not attend, were invited and incorporated in this volume. v

6 vi Preface These Proceedings volume is organized as follows: Part I dedicated to the study of systemic risk, network dynamics and other empirical studies. Part II devoted to model-based studies. We have also included Part III for miscellaneous reports, to present some on-going or preliminary studies. Finally, we have summarized in a brief discussion and comments Appendix, some of the remarks made by the participants during the various interesting and animated exchanges that took place during the panel discussion in the conference. We are grateful to all the participants of the conference for their participation and contributions. We are also grateful to Mauro Gallegati and the Editorial Board of the New Economic Windows series of the Springer-Verlag (Italia) for their support in getting this Proceedings volume published as well, in their esteemed series. 1 The editors also address their thanks to the Centre for Applied Mathematics and Computational Science at Saha Institute, and École Centrale Paris for their support in organizing this conference. They would also like to thank Gayatri Tilak for providing invaluable help during the preparation of the manuscript. Châtenay-Malabry, France Kolkata, India Châtenay-Malabry, France Kolkata, India April, 2012 Frédéric Abergel Bikas K. Chakrabarti Anirban Chakraborti Asim Ghosh 1 Past volumes: (i) Econophysics of Order-driven Markets, Eds. F. Abergel, B.K. Chakrabarti, A. Chakraborti, M. Mitra, New Economic Windows, Springer-Verlag, Milan, (ii) Econophysics & Economics of Games, Social Choices and Quantitative Techniques, Eds. B. Basu, B.K. Chakrabarti, S.R. Chakravarty, K. Gangopadhyay, New Economic Windows, Springer-Verlag, Milan, (iii) Econophysics of Markets and Business Networks, Eds. A. Chatterjee, B.K. Chakrabarti, New Economic Windows, Springer-Verlag, Milan, (iv) Econophysics of Stock and other Markets, Eds. A. Chatterjee, B.K. Chakrabarti, New Economic Windows, Springer-Verlag, Milan, (v) Econophysics of Wealth Distributions, Eds. A. Chatterjee, S. Yarlagadda, B.K. Chakrabarti, New Economic Windows, Springer-Verlag, Milan, 2005.

7 Contents Part I Systemic Risk, Network Dynamics and Other Empirical Studies 1 Diffusion of Defaults Among Financial Institutions... 3 Gabrielle Demange 2 Systemic Risk and Complex Systems: A Graph-Theory Analysis.. 19 Delphine Lautier and Franck Raynaud 3 Omori Law After Exogenous Shocks on Supplier-Customer Network 39 Yoshi Fujiwara 4 Aftershock Prediction for High-Frequency Financial Markets Dynamics Fulvio Baldovin, Francesco Camana, Michele Caraglio, Attilio L. Stella, and Marco Zamparo 5 How Unstable Are Complex Financial Systems? Analyzing an Inter-bank Network of Credit Relations Sitabhra Sinha, Maximilian Thess, and Sheri Markose 6 Study of Statistical Correlations in Intraday and Daily Financial Return Time Series Gayatri Tilak, Tamás Széll, Rémy Chicheportiche, and Anirban Chakraborti 7 A Robust Measure of Investor Contrarian Behaviour Damien Challet and David Morton de Lachapelle 8 Evolution of Zipf s Law for Indian Urban Agglomerations Vis-à-Vis Chinese Urban Agglomerations Kausik Gangopadhyay and Banasri Basu vii

8 viii Contents Part II Model-Based Studies 9 Reaction to Extreme Events in a Minimal Agent Based Model Andrea Zaccaria, Matthieu Cristelli, and Luciano Pietronero 10 Predatory Trading and Risk Minimisation: How to (B)Eat the Competition Anita Mehta 11 Statistical Mechanics of Labor Markets He Chen and Jun-ichi Inoue 12 Kolkata Paise Restaurant Problem: An Introduction Asim Ghosh, Soumyajyoti Biswas, Arnab Chatterjee, Anindya Sundar Chakrabarti, Tapan Naskar, Manipushpak Mitra, and Bikas K. Chakrabarti 13 Kolkata Paise Restaurant Problem and the Cyclically Fair Norm Priyodorshi Banerjee, Manipushpak Mitra, and Conan Mukherjee 14 An Introduction to Multi-player, Multi-choice Quantum Games: Quantum Minority Games & Kolkata Restaurant Problems Puya Sharif and Hoshang Heydari Part III Miscellaneous Reports 15 Cluster Analysis and Gaussian Mixture Estimation of Correlated Time-Series by Means of Multi-dimensional Scaling Takero Ibuki, Sei Suzuki, and Jun-ichi Inoue 16 Analyzing Crisis in Global Financial Indices Sunil Kumar and Nivedita Deo 17 Study of Systemic Risk Involved in Mutual Funds Kishore C. Dash and Monika Dash 18 Characterizing Price Index Behavior Through Fluctuation Dynamics Prasanta K. Panigrahi, Sayantan Ghosh, Arjun Banerjee, Jainendra Bahadur, and P. Manimaran Appendix Discussions and Comments...297