The bounds of heavy-tailed return distributions in evolving complex networks

DOI10.1016/J.PHYSLETA.2012.11.047MaRDI QIDQ469745zbMATH OpenOpenAlexFDO

Authors João P. da Cruz, Pedro G. Lind

Publication date 11 November 2014

Published in Physics Letters. A (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1109.2803

zbMATH Keywords

agent-based modelmodel riskcriticality and crisis

Mathematics Subject Classification ID

Small world graphs, complex networks (graph-theoretic aspects) (05C82) Trade models (91B60) Heterogeneous agent models (91B69)

Abstract: We consider the evolution of scale-free networks according to preferential attachment schemes and show the conditions for which the exponent characterizing the degree distribution is bounded by upper and lower values. Our framework is an agent model, presented in the context of economic networks of trades, which shows the emergence of critical behavior. Starting from a brief discussion about the main features of the evolving network of trades, we show that the logarithmic return distributions have bounded heavy-tails, and the corresponding bounding exponent values can be derived. Finally, we discuss these findings in the context of model risk.

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Cited in

(3)

• Extremal properties of evolving networks: local dependence and heavy tails
• Multivariate Heavy Tails in Complex Networks
• Assessing the robustness of critical behavior in stochastic cellular automata

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• RiskMetrics

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