Fitness model for the Italian interbank money market

TLDR

The Italian interbank money market consists of banks exchanging daily liquidity loans and debts. The study uses complex‑network theory to quantitatively characterize community formation in this market. By applying topological analysis and a network‑growth model, the authors identify distinct bank groups with differing business strategies. The Pareto‑law‑based model, which does not rely on growth or preferential attachment, accurately reproduces the market’s statistical properties and provides a useful tool for evaluating liquidity policy impacts.

Abstract

We use the theory of complex networks in order to quantitatively characterize the formation of communities in a particular financial market. The system is composed by different banks exchanging on a daily basis loans and debts of liquidity. Through topological analysis and by means of a model of network growth we can determine the formation of different group of banks characterized by different business strategy. The model based on Pareto's law makes no use of growth or preferential attachment and it reproduces correctly all the various statistical properties of the system. We believe that this network modeling of the market could be an efficient way to evaluate the impact of different policies in the market of liquidity.