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Evaluating structural edge importance in temporal networks

Author

Listed:
  • Seabrook, Isobel E.
  • Barucca, Paolo
  • Caccioli, Fabio
Abstract
To monitor risk in temporal financial networks, we need to understand how individual behaviours affect the global evolution of networks. Here we define a structural importance metric—which we denote as le—for the edges of a network. The metric is based on perturbing the adjacency matrix and observing the resultant change in its largest eigenvalues. We then propose a model of network evolution where this metric controls the probabilities of subsequent edge changes. We show using synthetic data how the parameters of the model are related to the capability of predicting whether an edge will change from its value of le. We then estimate the model parameters associated with five real financial and social networks, and we study their predictability. These methods have applications in financial regulation whereby it is important to understand how individual changes to financial networks will impact their global behaviour. It also provides fundamental insights into spectral predictability in networks, and it demonstrates how spectral perturbations can be a useful tool in understanding the interplay between micro and macro features of networks.

Suggested Citation

  • Seabrook, Isobel E. & Barucca, Paolo & Caccioli, Fabio, 2021. "Evaluating structural edge importance in temporal networks," LSE Research Online Documents on Economics 112515, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:112515
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    File URL: http://eprints.lse.ac.uk/112515/
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Seabrook, Isobel & Barucca, Paolo & Caccioli, Fabio, 2022. "Structural importance and evolution: an application to financial transaction networks," LSE Research Online Documents on Economics 117130, London School of Economics and Political Science, LSE Library.
    2. Seabrook, Isobel & Barucca, Paolo & Caccioli, Fabio, 2022. "Structural importance and evolution: An application to financial transaction networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 607(C).
    3. Michel Alexandre & Thiago Christiano Silva & Francisco Aparecido Rodrigues, 2024. "Critical Edges in Financial Networks," Working Papers Series 594, Central Bank of Brazil, Research Department.

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    More about this item

    Keywords

    classification; dynamics; edge predictability; spectral perturbation;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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