As the financial system becomes more complex, new methods to understand its inherent risks and dynamics are needed. Kimmo Soramäki will discuss how network analysis of large‐scale financial transaction data can be used to improve our understanding systemic risk. He will also show case studies how visual analytics and accurate data driven maps of asset correlations and tail risks can enable a stronger intuition of market dynamics.
Global Network of Payment Flows - Presentation at Commerzbank Cash ForumKimmo Soramaki
The presentation summarizes results from the research paper by Samantha Cook and myself on "The Global Network of Payment Flows" and discusses other applications of payment data for gaining business insights or for improving risk models.
Applications of Network Theory in Finance and ProductionKimmo Soramaki
In recent years, network theory has proved useful in applications ranging from cancer research to the social graph. Applications of network theory are becoming ever more present also in economics and finance, with network analysis providing answers to questions where traditional analysis methods are weak, and leading to improved models across wide types of risks. This presentation discusses three real-world applications of network theory: identifying pivotal countries and payment corridors from the global network of payment flows, using industry level value chains for casualty risk modeling, and using asset correlation networks for detecting emerging and systemic risks.
Presented at the annual Financial Risk and Network Theory conference in Cambridge, I discuss recent work by FNA on addressing various financial risks with the help of network analysis.
Financial Network Analysis - Talk at Oslo University 25 March 2011Kimmo Soramaki
Kimmo will introduce research in financial network analysis. He will talk about recent research on networks across various disciplines and discuss how network analysis can be used to gain a better understanding of the financial system and enhance its stability. He will also present a new open source tool ( www.financialnetworkanalyzer.com ) that can help policymakers and researchers in the area.
Global Network of Payment Flows - Presentation at Commerzbank Cash ForumKimmo Soramaki
The presentation summarizes results from the research paper by Samantha Cook and myself on "The Global Network of Payment Flows" and discusses other applications of payment data for gaining business insights or for improving risk models.
Applications of Network Theory in Finance and ProductionKimmo Soramaki
In recent years, network theory has proved useful in applications ranging from cancer research to the social graph. Applications of network theory are becoming ever more present also in economics and finance, with network analysis providing answers to questions where traditional analysis methods are weak, and leading to improved models across wide types of risks. This presentation discusses three real-world applications of network theory: identifying pivotal countries and payment corridors from the global network of payment flows, using industry level value chains for casualty risk modeling, and using asset correlation networks for detecting emerging and systemic risks.
Presented at the annual Financial Risk and Network Theory conference in Cambridge, I discuss recent work by FNA on addressing various financial risks with the help of network analysis.
Financial Network Analysis - Talk at Oslo University 25 March 2011Kimmo Soramaki
Kimmo will introduce research in financial network analysis. He will talk about recent research on networks across various disciplines and discuss how network analysis can be used to gain a better understanding of the financial system and enhance its stability. He will also present a new open source tool ( www.financialnetworkanalyzer.com ) that can help policymakers and researchers in the area.
Engines of Order. Social Media and the Rise of Algorithmic Knowing.Bernhard Rieder
Talk given at the Social Media and the Transformation of Public Space Conference on June 19 at the University of Amsterdam. References and comments are in the notes section.
Global Trends in Large Value Payment SystemsKimmo Soramaki
We discuss 10 main trends in the settlement of large-value interbank payments;
1. Diffusion of Real Time Gross Settlement
2. Take Off of Hybrid Systems
3. Emergence of Cross Border and Offshore Payment Systems
4. The Rise of CLS
5. Increasing Settlement Values and Volumes
6. Shrinking Average Payment Size
7. Falling Number of System Participants
8. Extended Operating Hours
9. Declining Transaction Fess
10. Adoption of Common Standards for LVPS
As the financial system becomes more complex, new methods to understand the inherent risks and dynamics are needed. Kimmo Soramäki will discuss how network analysis of large‐scale financial transaction data can be used to improve our understanding systemic risk. He will also show case studies how visual analytics and accurate data driven maps of asset correlations and tail risks can enable a stronger intuition of market dynamics.
Presentation at FSC-PSSC Workshop "Systemic risk analysis: interconnectedness within the financial system and market infrastructures", Frankfurt, 17 October 2012
The paper presented here will be published in Journal of Economic Behavior and Organization (http://www.fna.fi/papers/jebo2012gs.pdf)
Mapping Financial Landscapes @ Norges BankKimmo Soramaki
Financial market turmoil has revealed the interconnected nature of modern financial systems. Industry, regulators and academics agree on the need for better analytical tools that can help monitor and safeguard against systemic risks. Kimmo Soramaki reviews new research in financial network analysis, including how network analysis of large-scale financial transaction data can be used to improve our understanding of how the financial system functions. How can visual analytics of time-series networks bring new insights? How can cross-asset networks enable stronger intuition of market dynamics?
Engines of Order. Social Media and the Rise of Algorithmic Knowing.Bernhard Rieder
Talk given at the Social Media and the Transformation of Public Space Conference on June 19 at the University of Amsterdam. References and comments are in the notes section.
Global Trends in Large Value Payment SystemsKimmo Soramaki
We discuss 10 main trends in the settlement of large-value interbank payments;
1. Diffusion of Real Time Gross Settlement
2. Take Off of Hybrid Systems
3. Emergence of Cross Border and Offshore Payment Systems
4. The Rise of CLS
5. Increasing Settlement Values and Volumes
6. Shrinking Average Payment Size
7. Falling Number of System Participants
8. Extended Operating Hours
9. Declining Transaction Fess
10. Adoption of Common Standards for LVPS
As the financial system becomes more complex, new methods to understand the inherent risks and dynamics are needed. Kimmo Soramäki will discuss how network analysis of large‐scale financial transaction data can be used to improve our understanding systemic risk. He will also show case studies how visual analytics and accurate data driven maps of asset correlations and tail risks can enable a stronger intuition of market dynamics.
Presentation at FSC-PSSC Workshop "Systemic risk analysis: interconnectedness within the financial system and market infrastructures", Frankfurt, 17 October 2012
The paper presented here will be published in Journal of Economic Behavior and Organization (http://www.fna.fi/papers/jebo2012gs.pdf)
Mapping Financial Landscapes @ Norges BankKimmo Soramaki
Financial market turmoil has revealed the interconnected nature of modern financial systems. Industry, regulators and academics agree on the need for better analytical tools that can help monitor and safeguard against systemic risks. Kimmo Soramaki reviews new research in financial network analysis, including how network analysis of large-scale financial transaction data can be used to improve our understanding of how the financial system functions. How can visual analytics of time-series networks bring new insights? How can cross-asset networks enable stronger intuition of market dynamics?
Slides from a PRMIA Webinar broadcast on 9 October 2013 by Alan Laubsch and me.
Description from PRMIA Website:
This webinar will apply advanced network visualization techniques to detect emerging systemic stress scenarios.
We will start with an introduction of the Adaptive Stress Testing framework, which harnesses network intelligence in the stress testing process. We'll show how Adaptive Stress Testing can be used to design credible scenarios and monitor emerging risks.
We review historical case studies, and then discuss potential emerging threats in the current market environment by using network visualization.
Identifying systemically important banks in payment systemsKimmo Soramaki
Talk at 'Systemic Risk Conference - Economists meet Neuroscientists' in Frankfurt on 18 September 2012. The conference was organized by House of Finance and Frankfurt Institute for Advanced Studies.
Financial Networks and Financial StabilityKimmo Soramaki
The recent global financial crisis has illustrated the role of financial linkages as a channel for the propagation of shocks. It also brought to the fore the concept that institutions may be “too interconnected to fail”, in addition to the traditional concept of being “too big to fail”.
Is network theory the best hope for regulating systemic risk?Kimmo Soramaki
The presentation is organised around three policy questions:
1. How can we measure the systemic importance of a bank?
2. Can regulators promote a safer financial system by affecting its topology?
3. Is it possible to devise early-warning indicators from real-time data?
Discussion of "Google matrix of world trade" @ DNBKimmo Soramaki
Discussion of “Google matrix of the world trade network"
(http://arxiv.org/abs/1103.5027) by L. Ermann and D.L .Shepelyansky at
De Nederlandsche Bank conference "Complex systems: Towards a better
understanding of financial stability and crises"
(http://bit.ly/tj6G2h)
Tools for Forecasting Financial Crisis @ ETHKimmo Soramaki
Presentation at the topical session "Forecasting Financial Crisis" at ETH workshop on "Coping with Crises in Complex Socio-Economic Systems" on 23 June 2011.
Contagion, Cascades and Disruptions to the Interbank Payment SystemKimmo Soramaki
We look at payment systems as complex adaptive systems and discuss a research agenda with
1) Evaluate the actual network topology of interbank payment flows through analysis of Fedwire transaction data
2) Build a parsimonious agent based model for payment systems that honors network topology
3) Evaluate response of payment systems to shocks and the possibility of cascading failure
Today there is vast amount of information present on the internet. There are a number of news media, blogs, social networks like Facebook, Google Plus etc. and microblogs such as Twitter that provide information to the user who is trying to extract some specific knowledge from the world wide web. Thus the user gets burdened with large amount of data which makes it difficult for the user to find the desired information. In this seminar report, we discuss the various techniques that are used to represent data in a more meaningful manner to counter the problem of Information Overload. We focus primarily on various algorithms used for Storyline Generation which is a technique to capture the underlying temporal and casual dependencies amongst the news events.
Similar to Financial Cartography at Bogazici University (20)
How to get verified on Coinbase Account?_.docxBuy bitget
t's important to note that buying verified Coinbase accounts is not recommended and may violate Coinbase's terms of service. Instead of searching to "buy verified Coinbase accounts," follow the proper steps to verify your own account to ensure compliance and security.
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
what is the best method to sell pi coins in 2024DOT TECH
The best way to sell your pi coins safely is trading with an exchange..but since pi is not launched in any exchange, and second option is through a VERIFIED pi merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and pioneers and resell them to Investors looking forward to hold massive amounts before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade pi coins with.
@Pi_vendor_247
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
how to sell pi coins at high rate quickly.DOT TECH
Where can I sell my pi coins at a high rate.
Pi is not launched yet on any exchange. But one can easily sell his or her pi coins to investors who want to hold pi till mainnet launch.
This means crypto whales want to hold pi. And you can get a good rate for selling pi to them. I will leave the telegram contact of my personal pi vendor below.
A vendor is someone who buys from a miner and resell it to a holder or crypto whale.
Here is the telegram contact of my vendor:
@Pi_vendor_247
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
BYD SWOT Analysis and In-Depth Insights 2024.pptxmikemetalprod
Indepth analysis of the BYD 2024
BYD (Build Your Dreams) is a Chinese automaker and battery manufacturer that has snowballed over the past two decades to become a significant player in electric vehicles and global clean energy technology.
This SWOT analysis examines BYD's strengths, weaknesses, opportunities, and threats as it competes in the fast-changing automotive and energy storage industries.
Founded in 1995 and headquartered in Shenzhen, BYD started as a battery company before expanding into automobiles in the early 2000s.
Initially manufacturing gasoline-powered vehicles, BYD focused on plug-in hybrid and fully electric vehicles, leveraging its expertise in battery technology.
Today, BYD is the world’s largest electric vehicle manufacturer, delivering over 1.2 million electric cars globally. The company also produces electric buses, trucks, forklifts, and rail transit.
On the energy side, BYD is a major supplier of rechargeable batteries for cell phones, laptops, electric vehicles, and energy storage systems.
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
Webinar Exploring DORA for Fintechs - Simont Braun
Financial Cartography at Bogazici University
1. Boğaziçi University
3rd February 2014
Financial Cartography
Dr. Kimmo Soramäki
Founder and CEO
Financial Network Analytics
www.fna.fi
2. Agenda
Mapping Interbank Payment Flows and Exposures
Soramäki, K. M.L. Bech, W.E. Beyeler, R.J. Glass and J. Arnold (2007). ‘The Topology of
Interbank Payments’ Physica A, Vol. 379, pp 317-333.
Soramäki, K. and S. Cook (2013). ‘Algorithm for Identifying Systemically important
Banks in Payment Systems’. Economics E-Journal, Vol. 7.
Langfield, S. and K. Soramaki (forthcoming). ‘Interbank Networks’. Journal of
Computational Economics.
Asset Correlation Networks
Soramäki, K., S. Cook and A. Laubsch (forthcoming). ‘A Network-Based Method for
Visual Identification of Systemic Risks’.
FNA Platform
Soramäki, K., S. Cook. (forthcoming) ‘Financial Network Analytics with FNA’. ISBN: 978952-67505-1-4
2
4. Fedwire – First Maps
Fedwire Interbank
Payment Network
Fall 2001
Around 8000 banks, 66
banks comprise 75% of
value,25 banks completely
connected
Soramäki, Bech, Beyeler, Glass and Arnold
(2007), Physica A, Vol. 379, pp 317-333.
4
5. Network Theory
The behavior of a node
cannot be understood
on the basis its own
properties alone.
Financial
Network Analysis
Social Network
Analysis
Network Science
NETWORK
THEORY
Graph & Matrix
Theory
Computer
Science
Biological
Network Analysis
To understand the
behavior of one node,
one must understand
the behavior of nodes
that may be several
links apart in the
network.
6. Networks Brings us Beyond the Data Cube
For example:
Entities:
100 banks
Variables:
Liquidity, Opening
Balance, Collateral, …
Time:
Daily data
Links:
Bilateral payment flows
Links are the 4th dimension to data
(Tesseract)
Information on the links
allows us to develop better
models for banks' liquidity
situation in times of stress
6
7. Systemic Risk
News articles mentioning “systemic risk”, Source: trends.google.com
Not
“The risk that a system composed of many interacting parts
fails (due to a shock to some of its parts)”
In Finance, the risk that a disturbance in the financial
system propagates and makes the system unable to
perform its function – i.e. allocate capital efficiently.
Or
Domino effects, cascading failures, financial
interlinkages, … -> i.e. a process in the financial network
7
8. More Network Maps
Federal funds
Bech, M.L. and Atalay, E. (2008), “The Topology of
the Federal Funds Market”. ECB Working Paper No. 986.
Italian money market
Iori G, G de Masi, O Precup, G Gabbi and G
Caldarelli (2008): “A network analysis of the Italian
overnight money market”, Journal of Economic
Dynamics and Control, vol. 32(1), pages 259-278
Unsecured Sterling
money market
Wetherilt, A. P. Zimmerman, and K. Soramäki
(2008), “The sterling unsecured loan market
during 2006–2008: insights from network
topology“, in Leinonen (ed), BoF Scientific
monographs, E 42
Cross-border bank lending
Minoiu, Camelia and Reyes, Javier A. (2010). A network analysis of global
banking:1978-2009. IMF Working Paper WP/11/74.
8
9. Common Centrality Metrics
Centrality metrics aim to summarize some notion of importance
Degree: Number of links
Closeness: Distance from/to other
nodes via shortest paths
Betweenness: Number of shortest
paths going through the node
Eigenvector: Nodes that are linked by
other important nodes are more central, eg.
Google’s PageRank
10. How to Calculate a Metric for Payment Flows
Depends on process that takes place in the network!
Trajectory
–
–
–
–
Geodesic paths (shortest paths)
Any path (visit no node twice)
Trails (visit no link twice)
Walks (free movement)
Transmission
– Parallel duplication
– Serial duplication
– Transfer
Source: Borgatti (2004)
12. Network Simulation
Interactive demo at: www.fna.fi/demos/sofe/viz/simulation.html
Failure Scenario
Black node = can receive
but cannot send (click to fail
a node)
Normal Scenario
Green node = Liquidity
available. Amount shown as
node size.
Red node = No, liquidity.
Queues build up. Number
12
queued shown as node size.
13. Predictive Modeling
• Predictive modeling is the process by which a model is
created to try to best predict the probability of an outcome
• For example: Given a distribution of liquidity among the
banks at noon, how is it going to be at 5pm?
– What is the distribution if bank A has an operational disruption
at noon?
– Who is affected first?
– Who is affected most?
– How is Bank C affected in an hour?
• Valuable information for decision making
– Crisis management
– Participant behavior
13
15. Market Signals
• Markets are a great information processing device that create
vast amounts of data useful for trading, risk management and
financial stability analysis
• Main signals: asset returns, volatilities and correlations
• There is no easy way to monitor
large numbers of assets and their
dependencies
-> Correlation Maps
15
16. Data in Example
…
Pairwise correlations of daily
returns on 35 global assets
(ETFs), incl.
•
•
•
•
•
Equity indices
FX
Commodities
Debt
Derivatives
One year of daily correlations with
exponentially-weighted moving
average (EWMA) estimate of the
(daily) returns’ standard deviation.
22. Correlation Network
Nodes are assets
Links are correlations:
Red = negative
Black = positive
Absence of link marks
that asset is not
significantly correlated
23. Minimum Spanning Tree
Hierarchical Structure in Financial Markets
Rosario Mantegna (1999)
‘Hierarchical Structure in
Financial Markets’
We use the Minimum
Spanning Tree (MST) of the
network to filter signal from
noise.
24. Phylogenetic Tree Layout
We lay out the assets by
their hierarchical structure
using Minimum Spanning
Tree of the asset network.
Shorter links indicate
higher correlations. Longer
links indicate lower
correlations.
Bachmaier, Brandes, and Schlieper (2005). Drawing Phylogenetic
Trees. Proceeding ISAAC'05 Proceedings of the 16th international
conference on Algorithms and Computation, pp. 1110-1121
25. Data Reduction + Adding Dimensions
Mapping Returns and Outliers
Network layout allows for
the display of multiple
dimensions of the same
data set on a single map:
Node color indicates latest
daily return
- Green = positive
- Red = negative
Node size indicates
magnitude of return
Bright green and red
indicate an outlier return