A model of financial contagion with variable asset returns may be replaced with a simple threshold model of cascades

Teruyoshi Kobayashi

Papers from arXiv.org

Abstract: I show the equivalence between a model of financial contagion and the threshold model of global cascades proposed by Watts (2002). The model financial network comprises banks that hold risky external assets as well as interbank assets. It is shown that a simple threshold model can replicate the size and the frequency of financial contagion without using information about individual balance sheets. Keywords: financial network, cascades, financial contagion, systemic risk.

Date: 2013-12, Revised 2014-04
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Citations: View citations in EconPapers (7)

Published in Economics Letters 124, 113-116, 2014

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Related works:
Journal Article: A model of financial contagion with variable asset returns may be replaced with a simple threshold model of cascades (2014)
Working Paper: A model of financial contagion with variable asset returns may be replaced with a simple threshold model of cascades (2013)
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