A crucial property of graphs such as those in Chart 1 is their degree distribution. In a directed graph, each node has two degrees, an in-degree, the number of links that point into the node, and an out-degree, which is the number pointing out. Incoming links to a node or bank re ect the interbank assets/exposures of that bank, ie monies owed to the bank by a counterparty. Outgoing links from a bank, by contrast, correspond to its interbank liabilities. In what follows, the joint distribution of in and out-degree governs the potential for the spread of shocks through the network. For reasons outlined above, our analysis takes.
