SELF-ORGANIZED CRITICALITY IN A MODEL OF COLLECTIVE BANK BANKRUPTCIES

Agata Aleksiejuk, Janusz A. Hołyst () and Gueorgi Kossinets
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Agata Aleksiejuk: Faculty of Physics, Warsaw University of Technology, Koszykowa 75, PL-00-662 Warsaw, Poland;
Janusz A. Hołyst: Faculty of Physics, Warsaw University of Technology, Koszykowa 75, PL-00-662 Warsaw, Poland;
Gueorgi Kossinets: Department of Sociology, Columbia University, 413 Fayerweather Hall, 1180 Amsterdam Ave., Mail Code 2551, New York, NY 10027, USA

International Journal of Modern Physics C (IJMPC), 2002, vol. 13, issue 03, 333-341

Abstract: The question we address here is of whether phenomena of collective bankruptcies are related to self-organized criticality. In order to answer it we propose a simple model of banking networks based on the random directed percolation. We study effects of one bank failure on the nucleation of contagion phase in a financial market. We recognize the power law distribution of contagion sizes in 3d- and 4d-networks as an indicator of SOC behavior. The SOC dynamics was not detected in 2d-lattices. The difference between 2d- and 3d- or 4d-systems is explained due to the percolation theory.

Keywords: Econophysics; Monte Carlo; randomly directed percolation; business failure (search for similar items in EconPapers)
Date: 2002
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DOI: 10.1142/S0129183102003164

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