The hyperbolic geometry of financial networks.

ABSTRACT: Based on data from the European banking stress tests of 2014, 2016 and the transparency exercise of 2018 we construct networks of European banks and demonstrate that the latent geometry of these financial networks can be well-represented by geometry of negative curvature, i.e., by hyperbolic geometry. Using two different hyperbolic embedding methods, hydra+ and Mercator, this allows us to connect the network structure to the popularity-vs-similarity model of Papdopoulos et al., which is based on the Poincaré disc model of hyperbolic geometry. We show that the latent dimensions of 'popularity' and 'similarity' in this model are strongly associated to systemic importance and to geographic subdivisions of the banking system, independent of the embedding method that is used. In a longitudinal

SUBMITTER: Keller-Ressel M 

PROVIDER: S-EPMC7910495 | biostudies-literature | 2021 Feb

REPOSITORIES: biostudies-literature