Key Borrowers Detected by the Intensities of Their Short-Range Interactions

18 Pages Posted: 12 Aug 2014

See all articles by Fuad T. Aleskerov

Fuad T. Aleskerov

National Research University Higher School of Economics

Irina Andrievskaya

National Research University Higher School of Economics

Elena Permjakova

National Research University Higher School of Economics

Date Written: August 12, 2014

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

JEL Classification: C7, G2

Suggested Citation

Aleskerov, Fuad T. and Andrievskaya, Irina and Permjakova, Elena, Key Borrowers Detected by the Intensities of Their Short-Range Interactions (August 12, 2014). Higher School of Economics Research Paper No. WP BRP 33/FE/2014 . Available at SSRN: https://ssrn.com/abstract=2479272 or http://dx.doi.org/10.2139/ssrn.2479272

Fuad T. Aleskerov

National Research University Higher School of Economics ( email )

20 Myasnitskaya Ulitsa
Moscow, 101000
Russia

Irina Andrievskaya (Contact Author)

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

Elena Permjakova

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

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