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Key Borrowers Detected By The Intensities Of Their Short-range Interactions

Fuad Aleskerov (), Irina Andrievskaya () and Elena Permjakova ()
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Fuad Aleskerov: National Research University Higher School of Economics
Elena Permjakova: National Research University Higher School of Economics

No WP BRP 33/FE/2014, HSE Working papers from National Research University Higher School of Economics

Abstract: The issue of systemic importance has received particular attention since the recent financial crisis when it came to the fore that an individual financial institution can disturb the whole financial system. Interconnectedness is considered as one of the key drivers of systemic importance. Several measures have been proposed in the literature in order to estimate the interconnectedness of financial institutions and systems. However, most of them lack an important dimension of this characteristic: intensities of agent interaction. This paper proposes a novel method that solves this issue. A distinctive feature of our approach is that it takes into consideration not just the interconnectedness of agents but also their interaction intensities. The approach is based on the power index and centrality analysis and is employed to find a key borrower in a loan market. To illustrate the feasibility of our methodology we apply it at the European Union level and find key countries-borrowers.

Keywords: Power index; key borrower; systemic importance; interconnectedness; centrality (search for similar items in EconPapers)
JEL-codes: C7 G2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-gth, nep-hme and nep-rmg
Date: 2014
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Published in WP BRP Series: Financial Economics / FE, August 2014, pages - 18

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