We present novel research showing the effect of the core-periphery network structure on the stability of interbank networks. We begin by reproducing Gai and Kapadia’s results on the stability of interbank networks of random structure, which we use as our benchmark. We then simulate single-node defaults in a variety of interbank networks of core-periphery structure. Finally, we analyse our results and offer possible explanations for our observations. We find that interbank networks of core-periphery structure are more stable than those of Erdős–Rényi random structure. In addition, our results show that the stability of a core-periphery network can be improved by increasing the ratio of periphery to core nodes.
A third year project, part of Computer Science at UCL.