The network structure of the China bond market: Characteristics and explanations from trading factors

Dongmin Yao, Rong Sun and Qiunan Gao

Physica A: Statistical Mechanics and its Applications, 2022, vol. 598, issue C

Abstract: Based on the transaction records of financial institutions in the China interbank bond market, we construct a binary and directed trading network for each trading day. Topology analysis of network snapshots shows the network to be scale-free and disassortative, revealing a stable “core–peripheral” hierarchical structure. Further, the rich-core method is adopted to identify the core nodes and divide the overall network into three subnetworks. Relying on the exponential random graph model (ERGM), we find that the pledge rate is vital in shaping the network structure. Still, collateral has a relatively weak impact as compensation for default risk. Appropriate counterparties, including primary dealers, trading institutions sharing more common counterparties and institutions that have formed long-term trading relationships, are conducive to forming a network. We also find that the transaction cost factor has the least impact on the core subnetwork, and the counterparty factor is more important for the intermediate and peripheral subnetworks.

Keywords: Interbank bond market; Core–periphery structure; Transaction factor; ERGM (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378437122002710
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:598:y:2022:i:c:s0378437122002710

DOI: 10.1016/j.physa.2022.127347

Access Statistics for this article

Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Catherine Liu ().