Systemic risk in derivative markets : a graph-theory analysis
Lautier, Delphine; Raynaud, Franck (2011), Systemic risk in derivative markets : a graph-theory analysis, Workshop on commodities, EM Lyon Business School, Center for Financial Risks Analysis, 2011-05, Lyon, France
TypeCommunication / Conférence
Conference titleWorkshop on commodities, EM Lyon Business School, Center for Financial Risks Analysis
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Abstract (EN)This article inves tigates the time evolution of the integra tion of derivative markets through the graph-theory. We focus on three categor ies of underlying as sets : energy and agricultural products , as well as ﬁnancial assets . Integration is seen as a necessary condition for systemic risk to appear. In order to fully understand it, this phenomenon is comprehended through a three-dimensional approach : observation time, spatial relations hips and terms tructures. Such an approach indeed gives the possibility to investigate pricess hocks appearing and propagating in the physical as well as in the paper markets . In order to unders tand the underly ing principles and dynamic behavior of our system, we select speciﬁc tools of statistical physics . We ﬁrst use minimums panning trees as a way to ﬁlter the information contained in the graph. We then study the topology of the ﬁltered networks in order, ﬁrst to see how the y are organized, second to quantify the degree of randomness in this organization. Lastly, the time dependent properties of the trees are examined. On an economic point of view, the emerging taxonomy is meaningful, which is a key justiﬁcation of the use of our methodology. Moreover, we observe an increasing integration of the markets through time, as well as a dominance of s patial over maturity integration.
Subjects / Keywordsderivative markets; Systemic risk; graph theory
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