Key Borrowers Detected by the Intensities of Their Interactions

P. 355–389.

Aleskerov F. T., Andrievskaya I. K., Nikitina A., Shvydun S.

We propose a novel method to estimate the level of interconnectedness of a financial institution or system, as the measures currently suggested in the literature do not fully take into consideration an important aspect of interconnectedness — group interactions of agents. Our approach is based on the power index and centrality analysis and is employed to find a key borrower in a loan market. It has three distinctive features: it considers long-range interactions among agents, agents’ attributes and a possibility of an agent to be affected by a group of other agents. This approach allows us to identify systemically important elements which cannot be detected by classical centrality measures or other indices. The proposed method is employed to analyze the banking foreign claims as of 1Q 2015. Using our approach, we detect two types of key borrowers (a) major players with high ratings and positive credit history; (b) intermediary players, which have a great scale of financial activities through the organization of favorable investment conditions and positive business climate.

Keywords: power index, key borrower, systemic importance, interconnectedness, centrality, S-long-range interactions, paths

Publication based on the results of: Decision making and data analysis in socio-economic and political systems (2020)

In book

Handbook of Financial Econometrics, Mathematics, Statistics, and Machine Learning (In 4 Volumes)

World Scientific, 2020.