Two financial networks, namely, cross-border long-term debt and equity securities portfolio investment networks are analysed  . They serve as proxies for measuring the interdependence of financial markets and the robustness of the global financial system from 2002 to 2012, covering the 2008 global financial crisis. Focusing on the largest strongly-connected core component of the threshold network, while the edge threshold is set according to the percolation properties of the long-term debt securities network, we identify two early-warning indicators for global financial distress. The spread of certain financial derivative products, such as credit default swaps and equity-linked derivatives, scales with the edge density of the long-term debt securities network . In addition, the algebraic connectivity of the equity securities network, taken as a measure for the robustness of financial markets, drops already sharply well ahead of the 2008 financial crisis .
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 .
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Two financial networks, namely, cross-border
Cross-border equity and
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and equity
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from 2002 to 2012, covering the 2008 global financial crisis
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proxies
network-proxies
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interdependence of financial markets and the
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from 2002 to 2012, covering the 2008 global financial crisis. Focusing on the largest strongly-connected core component of the threshold network, while the edge threshold is set according to the percolation properties of the long-term debt securities network, we identify two
and the interdependence of financial markets, respectively. Two
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indicators for global financial distress. The spread of certain financial derivative products, such as credit default swaps and equity-linked derivatives, scales with
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,
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long-term
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. In addition, the algebraic connectivity of the equity securities network, taken as a measure for the robustness of financial markets, drops already sharply well ahead of
is found to describe, and even forecast,
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2008 financial crisis
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