A model of financial contagion with variable asset returns may be replaced with a simple threshold model of cascades
AbstractI 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Economics Letters.
Volume (Year): 124 (2014)
Issue (Month): 1 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/ecolet
Financial network; Cascades; Financial contagion; Systemic risk;
Other versions of this item:
- Teruyoshi Kobayashi, 2013. "A model of financial contagion with variable asset returns may be replaced with a simple threshold model of cascades," Discussion Papers 1315, Graduate School of Economics, Kobe University.
- Teruyoshi Kobayashi, 2013. "A model of financial contagion with variable asset returns may be replaced with a simple threshold model of cascades," Papers 1312.6804, arXiv.org, revised Apr 2014.
- G01 - Financial Economics - - General - - - Financial Crises
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Simone LENZU & Gabriele TEDESCHI, 2012.
"Systemic risk on different interbank network topologies,"
375, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
- Lenzu, Simone & Tedeschi, Gabriele, 2012. "Systemic risk on different interbank network topologies," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(18), pages 4331-4341.
- J. Lorenz & S. Battiston & F. Schweitzer, 2009.
"Systemic risk in a unifying framework for cascading processes on networks,"
The European Physical Journal B - Condensed Matter and Complex Systems,
Springer, vol. 71(4), pages 441-460, October.
- Jan Lorenz & Stefano Battiston & Frank Schweitzer, 2009. "Systemic Risk in a Unifying Framework for Cascading Processes on Networks," Papers 0907.5325, arXiv.org, revised Jan 2010.
- Jan Lorenz & Stefano Battiston & Frank Schweitzer, . "Systemic Risk in a Unifying Framework for Cascading Processes on Networks," Working Papers CCSS-09-011, ETH Zurich, Chair of Systems Design.
- Soramäki, Kimmo & Bech, Morten L. & Arnold, Jeffrey & Glass, Robert J. & Beyeler, Walter E., 2007.
"The topology of interbank payment flows,"
Physica A: Statistical Mechanics and its Applications,
Elsevier, vol. 379(1), pages 317-333.
- Gai, Prasanna & Haldane, Andrew & Kapadia, Sujit, 2011. "Complexity, concentration and contagion," Journal of Monetary Economics, Elsevier, vol. 58(5), pages 453-470.
- Teruyoshi Kobayashi & Kohei Hasui, 2013. "Efficient immunization strategies to prevent financial contagion," Papers 1308.0652, arXiv.org, revised Dec 2013.
- Teruyoshi Kobayashi, 2013.
"Network versus portfolio structure in financial systems,"
- Teruyoshi Kobayashi, 2013. "Network versus portfolio structure in financial systems," Discussion Papers 1307, Graduate School of Economics, Kobe University.
- Upper, Christian, 2011. "Simulation methods to assess the danger of contagion in interbank markets," Journal of Financial Stability, Elsevier, vol. 7(3), pages 111-125, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.