A credit contagion model for loan portfolios in a network of firms with spatial interaction
AbstractThis contribution studies the effects of credit contagion on the credit risk of a portfolio of bank loans. To this aim we introduce a model that takes into account the counterparty risk in a network of interdependent firms that describes the presence of business relations among different firms. The location of the firms is simulated with probabilities computed using an entropy spatial interaction model. By means of a wide simulation analysis we use the model proposed to study the effects of default contagion on the loss distribution of a portfolio.
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Bibliographic InfoPaper provided by Department of Applied Mathematics, Università Ca' Foscari Venezia in its series Working Papers with number 143.
Length: 26 pages
Date of creation: Nov 2006
Date of revision:
credit risk; bank loan portfolios; contagion models; entropy spatial models;
Find related papers by JEL classification:
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-18 (All new papers)
- NEP-BAN-2006-11-18 (Banking)
- NEP-CMP-2006-11-18 (Computational Economics)
- NEP-GEO-2006-11-18 (Economic Geography)
- NEP-RMG-2006-11-18 (Risk Management)
- NEP-URE-2006-11-18 (Urban & Real Estate Economics)
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.:
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Serie Research Memoranda
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"Credit contagion in a network of firms with spatial interaction,"
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- Diana Barro & Antonella Basso, 2008. "Credit contagion in a network of firms with spatial interaction," Working Papers 186, Department of Applied Mathematics, Università Ca' Foscari Venezia.
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