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SUMMARY:The formation of a core periphery structure in heterogeneous finan
 cial networks - van der Leij\, M (Universiteit van Amsterdam)
DTSTART:20140822T090000Z
DTEND:20140822T094500Z
UID:TALK53869@talks.cam.ac.uk
CONTACT:Mustapha Amrani
DESCRIPTION:Recent empirical evidence suggests that financial networks exh
 ibit a core periphery network structure. This paper aims at giving an econ
 omic explanation for the emergence of such a structure using network forma
 tion theory. Focusing on intermediation benefits\, we find that a core per
 iphery network cannot be unilaterally stable when agents are homogeneous. 
 The best-response dynamics converge to a unique unilaterally stable outcom
 e ranging from an empty to denser networks as the costs of linking decreas
 e. A core periphery network structure can form endogenously\, however\, if
  we allow for heterogeneity among agents in size. We show that our model c
 an reproduce the observed core periphery structure in the Dutch interbank 
 market for reasonable parameter values.\n\nJoint work with Daan in't Veld\
 , Marco van der Leij\, Cars Hommes\n\n
LOCATION:Seminar Room 2\, Newton Institute Gatehouse
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