Google, math and the physics of finance

The algorithm on which google is based, PageRank, could be replicated and applied to finance, so as to measure the extent to which financial institutions are interconnected. PageRank links pages to each others and the ones most connected to other important ones will be ranked accordingly. In others words, the algorythm captures the circularity of interconnection. Buchanan explains Bloomberg the parrallel with an algorithm European phycisits and economist developed:

Their algorithm, DebtRank, seeks to measure the total economic value that would be destroyed if a bank became distressed or went into default. It does so by moving outward from the bank through the web of links in the financial system to estimate all the various consequences likely to accrue from one failure. Banks connected to more banks with high DebtRank scores would, naturally, have higher DebtRank scores themselves.