title: Cross-border portfolio investment networks and indicators for financial crises.
abstract: Cross-border equity and long-term debt securities portfolio investment networks are analysed from 2002 to 2012, covering the 2008 global financial crisis. They serve as network-proxies for measuring the robustness of the global financial system and the interdependence of financial markets, respectively. Two early-warning indicators for financial crises are identified: First, the algebraic connectivity of the equity securities network, as a measure for structural robustness, drops close to zero already in 2005, while there is an over-representation of high-degree off-shore financial centres among the countries most-related to this observation, suggesting an investigation of such nodes with respect to the structural stability of the global financial system. Second, using a phenomenological model, the edge density of the debt securities network is found to describe, and even forecast, the proliferation of several over-the-counter-traded financial derivatives, most prominently credit default swaps, enabling one to detect potentially dangerous levels of market interdependence and systemic risk.
authors: Centre for Chaos and Complex Networks, Department of Electronic Engineering, City University of Hong Kong, Hong Kong S.A.R., China.
authors: Andreas C
authors: AC
authors: Joseph
authors: Faculty of Economics and Business, Universitat de Barcelona, Catalonia, Spain.
authors: Stephan E
authors: SE
authors: Joseph
authors: Centre for Chaos and Complex Networks, Department of Electronic Engineering, City University of Hong Kong, Hong Kong S.A.R., China.
authors: Guanrong
authors: G
authors: Chen