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Financial bridges and network communities

Author

Listed:
  • Casarin, Roberto
  • Costola, Michele
  • Yenerdag, Erdem

Abstract

We analyze the global financial crisis and the European sovereign debt crisis showing that the European network exhibits a strong community structure with two main blocks acting as shock spreader and receiver, respectively. We provide evidence of the prominent role played by insurances in the spread of systemic risk in both crises and demonstrate that institutions with a large number of inter-community linkages (community bridges) are more relevant in spreading contagion than institutions with large centrality. Network measures based on the community structure can provide a better description of the financial connectedness and effective early warning indicators for financial losses.

Suggested Citation

  • Casarin, Roberto & Costola, Michele & Yenerdag, Erdem, 2018. "Financial bridges and network communities," SAFE Working Paper Series 208, Leibniz Institute for Financial Research SAFE, revised 2018.
    • Handle: RePEc:zbw:safewp:208
    DOI: 10.2139/ssrn.3178053
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    References listed on IDEAS

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    More about this item

    Keywords

    Systemic Risk; Financial Institutions; Network Communities; Financial Crises;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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