Self-organized criticality in a model of collective bank bankruptcies

Agata Aleksiejuk, Janusz A. Holyst and Gueorgi Kossinets

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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.

Date: 2001-11, Revised 2001-12
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Published in Int. J. Mod. Phys. C 13 (3): 333-341 MAR 2002

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