Estimation of tipping points for critical and transitional regimes in the evolution of complex interbank network

Abstract

We consider an agent-based model of dynamic interbank network, evolving under several influential factors. Co-evolution is formally performed by the connection between node states and topology of interaction, and vice versa. During the simulation, network evolves to critical regime, corresponding to cascading behaviour in the system, through transitional one. Results show these global regimes correspond to dynamics at micro-level with three types of node states. On the base of formal model of system evolution and regimes formal definitions we estimate the starting point of cascading behaviour and determine number of iterations before its early warning signal – the start of transitional regime. Experiment is made for the interbank market model, nevertheless, possible applications are not restricted by the case. We show, that the obtained estimations allow for appropriate prediction of starting points of critical and transitional regimes (which correspond to cascading behaviour and its early warning signal) and explanation of observed dynamics in the evolution of banking system model under fund infusion scenario.