Contagion in Financial Networks: A Threat Index

Gabrielle Demange

Management Science, 2018, vol. 64, issue 2, 955-970

Abstract: This paper proposes to measure the spillover effects that cross liabilities generate on the magnitude of default in a system of financially linked institutions. Based on a simple model and an explicit criterion—the aggregate debt repayments—the measure is defined for each institution, affected by its characteristics and links to others. These measures—one for each institution—summarize relevant information on the interaction between the liabilities structure and the shocks to resources, and they can be useful to determine optimal intervention policies. The approach is illustrated to evaluate the consolidated foreign claims of 10 European Union countries.

Keywords: propagation of defaults; financial linkages; intervention policy (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

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https://doi.org/10.287/mnsc.2016.2592 (application/pdf)

Related works:
Working Paper: Contagion in Financial Networks: A Threat Index (2018)
Working Paper: Contagion in Financial Networks: A Threat Index (2018)
Working Paper: Contagion in financial networks: a threat index (2016)
Working Paper: Contagion in financial networks: a threat index (2016)
Working Paper: Contagion in Financial Networks: A Threat Index (2015)
Working Paper: Contagion in financial networks: A threat index (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:64:y:2018:i:2:p:-955-970

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