Contagion and loss redistribution in crypto asset markets

Katrin Schuler, Matthias Nadler and Fabian Schär

Economics Letters, 2023, vol. 231, issue C

Abstract: This paper addresses the growing concern of shock propagation in crypto asset markets. The integration of conventional financial institutions (CeFi) and decentralized financial protocols (DeFi) has introduced a set of complexities that are not adequately accounted for in current models. We build on the well-established framework by Eisenberg and Noe (2001) and propose a generalized extension that can be applied to mixed DeFi/CeFi networks. Our model serves as a tool for comprehending potential contagion channels and loss redistribution resulting from the non-recourse nature of DeFi loans.

Keywords: Crypto assets; Decentralized finance; Non-recourse loans; Shock propagation; Systemic risk (search for similar items in EconPapers)
JEL-codes: G01 G10 G29 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:231:y:2023:i:c:s016517652300335x

DOI: 10.1016/j.econlet.2023.111310

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