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Self-organized criticality in a model of collective bank bankruptcies

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  • Agata Aleksiejuk
  • Janusz A. Holyst
  • Gueorgi Kossinets

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.

Suggested Citation

  • Agata Aleksiejuk & Janusz A. Holyst & Gueorgi Kossinets, 2001. "Self-organized criticality in a model of collective bank bankruptcies," Papers cond-mat/0111586, arXiv.org, revised Dec 2001.
    • Handle: RePEc:arx:papers:cond-mat/0111586
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