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The financial crisis clearly illustrated the importance of characterizing the level of 'systemic' risk associated with an entire credit network, rather than with single institutions. However, the interplay between financial distress and topological changes is still poorly understood. Here we analyze the quarterly interbank exposures among Dutch banks over the period 1998-2008, ending with the crisis. After controlling for the link density, many topological properties display an abrupt change in 2008, providing a clear - but unpredictable - signature of the crisis. By contrast, if the heterogeneity of banks' connectivity is controlled for, the same properties show a gradual transition to the crisis, starting in 2005 and preceded by an even earlier period during which anomalous debt loops could have led to the underestimation of counter-party risk. These early-warning signals are undetectable if the network is reconstructed from partial bank-specific data, as routinely done. We discuss important implications for bank regulatory policies. [ABSTRACT FROM AUTHOR]

The interplay between topology and dynamics in complex networks is a fundamental but widely unexplored problem. Here, we study this phenomenon on a prototype model in which the network is shaped by a dynamical variable. We couple the dynamics of the Bak–Sneppen evolution model with the rules of the so-called fitness network model for establishing the topology of a network; each vertex is assigned a ‘fitness’, and the vertex with minimum fitness and its neighbours are updated in each iteration. At the same time, the links between the updated vertices and all other vertices are drawn anew with a fitness-dependent connection probability. We show analytically and numerically that the system self-organizes to a non-trivial state that differs from what is obtained when the two processes are decoupled. A power-law decay of dynamical and topological quantities above a threshold emerges spontaneously, as well as a feedback between different dynamical regimes and the underlying correlation and percolation properties of the network. [ABSTRACT FROM AUTHOR]

Although Camacho and Arenas raise potentially interesting points, we believe that some of their arguments are flawed or undermined by poor statistics, and therefore that they do not invalidate our results. [ABSTRACT FROM AUTHOR]