Trust is a collective, self-fulfilling phenomenon that suggests analogies with phase transitions. We introduce a stylized model for the build-up and collapse of trust in networks, which generically displays a first order transition. The basic assumption of our model is that whereas trust begets...

Using trader-resolved data, we document lead-lag relationships between groups of investors in the foreign exchange market. Because these relationships are systematic and persistent, order flow is predictable from trader-resolved order flow. We thus propose a generic method to exploit trader...

The breakdown of short-term funding markets was a key feature of the global financial crisis of 2007/8. Combining insights from the literature on global games and network growth, we develop a simple model that sheds light on how network topology interacts with the funding structure of financial...

The breakdown of short-term funding markets was a key feature of the global financial crisis of 2007/8. Combining insights from the literature on global games and network growth, we develop a simple model that sheds light on how network topology interacts with the funding structure of financial...

In this paper we estimate the propagation of liquidity shocks through interbank markets when the information about the underlying credit network is incomplete.We show that techniques such as Maximum Entropy currently used to reconstruct credit networks severely underestimate the risk of...

The very notion of social network implies that linked individuals interact repeatedly with each other. This allows them not only to learn successful strategies and adapt to them, but also to condition their own behavior on the behavior of others, in a strategic forward looking manner. Game...