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Systemic importance of financial institutions: A complex network perspective

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  • Yang, Xin
  • Wen, Shigang
  • Zhao, Xian
  • Huang, Chuangxia

Abstract

This paper employs Clayton copula model to construct a lower tail network for 88 financial institutions in the USA from January 2006 to December 2018. Then, the corresponding minimal spanning tree(MST) map is generated. We find that the financial institution network is divided into 11 communities by community analysis, where the insurance institutions are identified as systemically important sectors. Furthermore, we investigate the systemic importance of financial institutions(SIFIs) by centrality measures, and find that the dominating institutions are J P Morgan Chase & Co, Raymond James Financial, Inc. and Prudential Financial, Inc. In addition, we use normalized tree length to identify financial crises, and it decreased sharply during the subprime crisis.

Suggested Citation

  • Yang, Xin & Wen, Shigang & Zhao, Xian & Huang, Chuangxia, 2020. "Systemic importance of financial institutions: A complex network perspective," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 545(C).
    • Handle: RePEc:eee:phsmap:v:545:y:2020:i:c:s0378437119319223
    DOI: 10.1016/j.physa.2019.123448
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    Cited by:

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    2. Jiang, Cheng & Sun, Qian & Ye, Tanglin & Wang, Qingyun, 2023. "Identification of systemically important financial institutions in a multiplex financial network: A multi-attribute decision-based approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 611(C).
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    5. Wang, Ze & Gao, Xiangyun & Huang, Shupei & Sun, Qingru & Chen, Zhihua & Tang, Renwu & Di, Zengru, 2022. "Measuring systemic risk contribution of global stock markets: A dynamic tail risk network approach," International Review of Financial Analysis, Elsevier, vol. 84(C).

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