This method is based on the paper
Systemic risk analysis in reconstructed economic and financial networks
Giulio Cimini,
Tiziano Squartini,
Diego Garlaschelli,
Andrea Gabrielli
DebtRank: a microscopic foundation for shock propagation Marco Bardoscia, Stefano Battiston, Fabio Caccioli, Guido Caldarelli
PLoS ONE 10(6): e0130406 (2015)
INPUT (Partial) information represented by the total number N of banks, the (known or reconstructed) weighted, directed adjacency matrix W, banks' equity E0 at time 0, banks' equity E1 at time 1 and the total amount of time tau one is interested in letting our simulation run.Since the weighted, directed adjacency matrix W is usually not known, an algorithmis needed in order to estimate the presence and the magnitude of each entry of W.
STEPS OF THE METHOD[1] check if some banks are already defaulted, by checking if the corresponding equities are zero, E0(i)<0. If this is the case, they remain in the "default" state at all subsequent time steps;
where [6] update the state of banks by calculatingh(i,t+1) = min{1,h(i,t)+∆(i,t)}and check if some banks are defaulted because of the transmitted distress, by checking if h(i)=1 or h(i)>1;[7] repeat steps 5-7 for the desired number of time steps.
The output of our algorithm consists of a list for each time step The algorithm also outputs a global index, i.e. the DebtRank, which is defined as the weighted average of the
where [1] download the *.rar file at the bottom of the page;[2] put the Matlab routines and the *.txt files inside the same folder;[3] run the code line: [hList,DR]=DebtRank(W,E0,E1,tau);[4] as output, the list of the h indices and the DebtRank indicator are obtained. |

Downloadable Files >