A Multi-Layer Network of the Sovereign Securities Market

25 Pages Posted: 2 Dec 2014

See all articles by Carlos León

Carlos León

Banco de la República (Central Bank of Colombia); Tilburg University - Center for Economic Research (CentER)

Jhonatan Pérez

Central Bank of Colombia

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Date Written: December 1, 2014

Abstract

We study the network of Colombian sovereign securities settlements. With data from the settlement market infrastructure we study financial institutions’ transactions from three different trading and registering individual networks that we combine into a multi-layer network. Examining this network of networks enables us to confirm that (i) studying isolated single-layer trading and registering networks yields a misleading perspective on the relations between and risks induced by participating financial institutions; (ii) a multi-layer approach produces a connective structure consistent with most real-world networks (e.g. sparse, inhomogeneous, and clustered); and (iii) the multi-layer network is a multiplex that preserves the main connective features of its constituent layers due to positively correlated multiplexity. The results highlight the importance of mapping and understanding how financial institutions relate to each other across multiple financial environments, and the value of financial market infrastructures as sources of data that may help to overcome the main obstacles for working on multi-layer financial networks.

Keywords: multiplex networks, financial market infrastructures, correlated multiplexity, settlement.

JEL Classification: D85, D53, G20, G01, L14

Suggested Citation

León, Carlos and Pérez, Jhonatan and Renneboog, Luc, A Multi-Layer Network of the Sovereign Securities Market (December 1, 2014). Available at SSRN: https://ssrn.com/abstract=2532461 or http://dx.doi.org/10.2139/ssrn.2532461

Carlos León (Contact Author)

Banco de la República (Central Bank of Colombia) ( email )

Bogotá
Colombia

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Jhonatan Pérez

Central Bank of Colombia ( email )

Carrera 7 #14-78
Bogota
Colombia

Luc Renneboog

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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