Spectral signatures of structural change in financial networks

Valentina Macchiati, Emiliano Marchese, Piero Mazzarisi, Diego Garlaschelli and Tiziano Squartini

Chaos, Solitons & Fractals, 2025, vol. 193, issue C

Abstract: The level of systemic risk in economic and financial systems is strongly determined by the structure of the underlying networks of interdependent entities that can propagate shocks and stresses. Since changes in network structure imply changes in risk levels, it is important to identify structural transitions potentially leading to system-wide crises. Methods have been proposed to assess whether a real-world network is in a (quasi-)stationary state by checking the consistency of its structural evolution with appropriate maximum-entropy ensembles of graphs. While previous analyses of this kind have focused on dyadic and triadic motifs, hence disregarding higher-order structures, here we consider closed walks of any length. Specifically, we study the ensemble properties of the spectral radius of random graph models calibrated on real-world evolving networks. Our approach is shown to work remarkably well for directed networks, both binary and weighted. As illustrative examples, we consider the Electronic Market for Interbank Deposit (e-MID), the Dutch Interbank Network (DIN) and the International Trade Network (ITN) in their evolution across the 2008 crisis. By monitoring the deviation of the spectral radius from its ensemble expectation, we find that the ITN remains in a (quasi-)equilibrium state throughout the period considered, while both the DIN and e-MID exhibit a clear out-of-equilibrium behaviour. The spectral deviation therefore captures ongoing topological changes, extending over all length scales, to provide a compact proxy of the resilience of economic and financial networks.

Keywords: Financial networks; Spectral properties; Systemic risk (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:chsofr:v:193:y:2025:i:c:s0960077925000785

DOI: 10.1016/j.chaos.2025.116065

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