Contagion in an interacting economy

Pierre Paga and Reimer K\"uhn

Papers from arXiv.org

Abstract: We investigate the credit risk model defined in Hatchett & K\"{u}hn under more general assumptions, in particular using a general degree distribution for sparse graphs. Expanding upon earlier results, we show that the model is exactly solvable in the $N\rightarrow \infty$ limit and demonstrate that the exact solution is described by the message-passing approach outlined by Karrer and Newman, generalized to include heterogeneous agents and couplings. We provide comparisons with simulations of graph ensembles with power-law degree distributions.

Date: 2014-09, Revised 2015-03
New Economics Papers: this item is included in nep-ger
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Published in J. Stat. Mech. (2015) P03008

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