Investor immunization to Ponzi scheme diffusion in social networks and financial risk analysis

Abstract

Most illegal Ponzi schemes are ultimately out of control and lead to systemic financial risk. Risk education and precaution are similar to mass random immunization of epidemic spreading. In this study, the effect of random immunization strategy is evaluated based on the potential-investor–divestor (PID) spreading model in both homo- and inhomogeneous social networks. Fund flux function and system balance function are formulated. The zero point of system balance is used as the collapse point. The peak value of balance, the total number of investors involved and the total amount of principal involved are defined to compare the immunization effects in various scenarios. Mathematical derivation and numerical simulation show that the random immunization takes effect by postponing the peak position of the system balance as well as suppressing the peak values of the system balance. This kind of positive effect helps reduce the scheme’s scale of total number of investors involved and total amount of principal involved. The random immunization is more powerful towards the schemes with small spreading rate than those with medium and high spreading rates. Hence, it is suitable for the concentrated regulation on a large amount of small scale and slow spreading schemes in bulk.