Contagion in Financial Networks: A Threat Index

Gabrielle Demange

PSE-Ecole d'économie de Paris (Postprint) from HAL

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: contagion of default; financial linkages; intervention policy (search for similar items in EconPapers)
Date: 2018
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01630616v1
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Citations: View citations in EconPapers (30)

Published in Management Science, 2018, 64 (2), pp.955-970. ⟨10.1287/mnsc.2016.2592⟩

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Related works:
Journal Article: 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:hal:pseptp:halshs-01630616

DOI: 10.1287/mnsc.2016.2592

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