Constructing banking networks under decreasing costs of link formation

The structure of networks plays a central role in the behavior of financial systems and their response to policy. Real-world networks, however, are rarely directly observable: banks’ assets and liabilities are typically known, but not who is lending how much and to whom. This paper adds to the existing literature in two ways. First, it shows how to simulate realistic networks that are based on balance-sheet information. To do so, we introduce a model where links cause fixed-costs, independent of contract size; but the costs per link decrease the more connected a bank is (scale economies). Second, to approach the optimization problem, we develop a new algorithm inspired by the transportation planning literature and research in stochastic search heuristics. Computational experiments find that the resulting networks are not only consistent with the balance sheets, but also resemble real-world financial networks in their density (which is sparse but not minimally dense) and in their core-periphery and disassortative structure.

     

New results for diffusion in Lorentz lattice gas cellular automata

New calculations to over ten million time steps have revealed a more complex diffusive behavior than previously reported of a point particle on a square and triangular lattice randomly occupied by mirror or rotator scatterers. For the square lattice fully occupied by mirrors where extended closed particle orbits occur, anomalous diffusion was still found. However, for a not fully occupied lattice the superdiffusion, first noticed by Owczarek and Prellberg for a particular concentration, obtains for all concentrations. For the square lattice occupied by rotators and the triangular lattice occupied by mirrors or rotators, an absence of diffusion (trapping) was found for all concentrations, except on critical lines, where anomalous diffusion (extended closed orbits) occurs and hyperscaling holds for all closed orbits withuniversal exponentsd _f =7/4 and =15/7. Only one point on these critical lines can be related to a corresponding percolation problem. The questions arise therefore whether the other critical points can be mapped onto a new percolation-like problem and of the dynamical significance of hyperscaling.