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WP8 - Correlations in complex financial networks

The goal of WP8 is to explore the distribution of correlations in a series of large, complex networks of heterogeneous agent models of increasing complexity, up to the study of the correlation structure of more realistic financial networks constructed in the main project (WP2). Ultimately the objective of the workpackage is to produce convincing evidence for the existence of randomly distributed, strong, long range correlations as a typical feature of complex systems, which make it impossible to divide them into weakly interacting parts. In
the particular case of the financial network, the main objective is to identify the cluster(s) of strongly correlated institutions that require special attention by regulation as candidates for the qualification of systemic importance.
In addition, by studying the inverse problem we wish to learn whether it is possible to gain an insight into the structure of underlying links between the components of these complex networks from the observation of their correlations, and whether the standard econometric tools are adequate for explaining the behaviour of one of these components in terms of the behaviour of its interacting partners.