Regensburg 2002 – scientific programme

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AKSOE: Physik sozio-ökonomischer Systeme

AKSOE 18: Finanzm
ärkte und Risikomanagement II

AKSOE 18.1: Invited Talk

Thursday, March 14, 2002, 09:30–10:15, H8

Collective bank bankruptcies and self-organized criticality — •Janusz Hołyst¹, Agata Aleksiejuk¹, and Gueorgi Kossinets² — ¹Faculty of Physics, Warsaw University of Technology, Koszykowa 75, PL-00-662 Warsaw, Poland — ²Department of Sociology, Columbia University, 413 Fayerweather Hall, 1180 Amsterdam Ave.Mail Code 2551, New York, NY 10027, USA,

We propose a simple model of banking networks based on random directed percolation. In comparison to previous work (1), the major development of the present model is the implementation of the concept of banking balance, which when positive, can be invested to make profits, but when negative, must be refilled to prevent the loss of liquidity. Directed connections between the nodes of bank lattice simulate flows of money. We study effects of one bank’s failure on the nucleation of contagion phase in a financial market (2). Computer simulations were done for square, cubic and four-dimensional hypercubic lattices. We recognize the power law distribution of contagion sizes in three- and four-dimensional networks as an indicator of self-organized critical behavior of the model. SOC dynamics was not detected in two-dimensional lattices. The difference between two- and three- or four-dimensional systems was explained in terms of percolation theory.
(1) A. Aleksiejuk, J.A. Hołyst, arXiv.org/abs/cond-mat/0109119, Physica A 299, 198-204 (2001).
(2) A. Aleksiejuk, J. A. Hołyst, Gueorgi Kossinets, arXiv.org/abs/cond-mat/0111586, Int. J. Mod. Phys. C 13, No. 3 (in press).