Contagion risk in endogenous financial networks

Shouwei Li and Xin Sui

Chaos, Solitons & Fractals, 2016, vol. 91, issue C, 591-597

Abstract: In this paper, we investigate contagion risk in an endogenous financial network, which is characterized by credit relationships connecting downstream and upstream firms, interbank credit relationships and credit relationships connecting firms and banks. The findings suggest that: increasing the number of potential lenders randomly selected can lead to an increase in the number of bank bankruptcies, while the number of firm bankruptcies presents a trend of increase after the decrease; after the intensity of choice parameter rises beyond a threshold, the number of bankruptcies in three sectors (downstream firms, upstream firms and banks) shows a relatively large margin of increase, and keeps at a relatively high level; there exists different trends for bankruptcies in different sectors with the change of the parameter of credits’ interest rates.

Keywords: Contagion risk; Credit network; Partner selection; Endogenous network (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chsofr:v:91:y:2016:i:c:p:591-597

DOI: 10.1016/j.chaos.2016.08.006

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