The Network Topology of the Hungarian Short-Term Foreign Exchange Swap Market

Abstract

Several studies have analyzed interbank networks, but to the best of our knowledge, foreign exchange swap (FX swap) markets have not been examined with the tools of network theory. We have made an empirical analysis of the network structure of the Hungarian FX swap market. The network of the FX swap market is a small-world type graph, which also means that the market is sensitive to the behavior of the big players (Albert et al. 1999). A continuous change was identified in centrality measures after 2010 until the end of our observation period (September 2012), which implies that those players that remain in the market can have a greater influence on the stability of the network. We have also found that preferential trading activity is more typical of foreign banks than of resident banks.