The Financial Ecosystem

assortative_disassortative

Before transferring to the business sector, I spent the first twenty years of my career as a physicist in academia (see eg here). Because of this I retain a strong interest in developments in this and related fields. There are often tantalising connections.

In this context, there’s an interesting article in +Plus magazine on thinking about the financial system through the eyes of mathematical biology:

Financial mathematics received a lot of bad press in the aftermath of the crunch and many believe that it was the popularity of mathematical models – often borrowed from physics — that put the financial system at risk. But now models borrowed from biology are helping us understand how this risk might be reduced.

In particular, models can help us understand how the structure of a network influences disease transmission. For instance, during an HIV/AIDS outbreak, a person with lots of partners will spread more infection than one with few. If the network is assortative — with individuals with lots of partners interacting mainly with others who have lots of partners — the infection will spread quickly initially but soon burn out. However, if the network is disassortative — with high-risk people mixing with low risk individuals — the epidemic will be slower, but result in more cases. Unfortunately the financial network appears to be disassortative, which means any problems are likely to spread widely.

See also here.

Picture credit: here.

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