Contagious Defaults in Inter-bank Networks

Ali Elminejad

No 2018/39, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: This paper investigates systemic risk and contagion processes in the inter-bank network using network science methods. The inter-bank network consisting 10 banks, similar to the real world inter-bank networks, is studied to understand the contagion process in the network regarding changes in the network structure, as well as changes in the characteristics of components. Simulations support the claim that heterogeneous networks are more resilient to contagious shocks, while systemic shocks are more problematic in homogeneous networks. The study also shows that more interconnections among banks could accelerate or block contagion proces depending on the structure of the network and seniority of debts in the inter-bank network as well.

Keywords: Complex Networks; Systemic Risk; Contagion; Default Risk; Epidemic Modeling (search for similar items in EconPapers)
JEL-codes: G01 G21 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2018-12, Revised 2018-12
New Economics Papers: this item is included in nep-ban, nep-hme, nep-rmg and nep-ure
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Journal Article: Contagious Defaults in Interbank Networks (2022)
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