Mastering R for Quantitative Finance

Possible interpretations and suggestions

The main difficulty of the examination of systemic importance is always its huge data need. From this point of view, core-periphery decomposition is an easier method because we only need the exposure of the banks on the interbank market. Although in many cases this may also result in some difficulty since direct linkages between banks are often unknown. However, in the literature, we can find some good solutions to fill these gaps, for example, the minimum density approach by Anand et al. (2014). Alternatively, there are some other suggestions on how to create a network from market data (for example, Billio et al., 2013).

Due to the differences between the two methods, the results can be confusing. We will ...