Contagion and contagions in financial markets: the application of network analysis in finance

The 2008 financial crisis highlighted the connectedness of financial institutions around the world. This networking can have important consequences, both positive and negative, for global and national financial systems. In this context, network theory and social network analysis (SNA) can provide helpful tools and measures to better understand the effects of networks or any other phenomena of finance or, to quote Allen and Babus (2009): Mapping the networks between financial institutions is a first step towards gaining a better understanding of modern financial systems.
The objective of this project is to study and analyse the topology and structure of different financial markets or networks, such as the mutual and pension funds networks, the syndicated loan market network and all the main securities markets. To do so, a comprehensive network theory approach that includes novel financial network analysis tools and metrics will offer an essential perspective on the underlying connections in the networks. Basic network structure metrics will be estimated, such as small-world statistic, scale-free parameters, etc. Further, novel network measures, which are typically developed in other fields, will be applied to the financial networks identified above: herd behavior, sources of diffusion, influential spreaders, bridges, adoption probabilities, mobility traces, etc. Because different networks can emerge from the same connections (e.g., dual-mode network, correlation network, etc.), the metrics will be estimated for a variety of networks.
The expected contributions of the project are both scientific and practical.

Faculty Supervisor:

Claudia Champagne

Student:

Tu? Nguy?n

Partner:

Discipline:

Business

Sector:

University:

Program:

Globalink