Credit contagion in a network of firms with spatial interaction
AbstractIn this contribution we carried out a wide simulation analysis in order to study the contagion mechanism induced in a portfolio of bank loans by the presence of business relationships among the positions. To this aim we jointly apply a structural model based on a factor approach extended in order to include the presence of microeconomic relationships that takes into account the counterparty risk, and a network model to describe the business connections among interdependent firms. The network of firms is generated resorting to an entropy spatial interaction model.
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Bibliographic InfoPaper provided by Department of Applied Mathematics, Università Ca' Foscari Venezia in its series Working Papers with number 186.
Length: 18 pages
Date of creation: Nov 2008
Date of revision:
credit risk; bank loan portfolios; contagion models; entropy spatial models;
Other versions of this item:
- Barro, Diana & Basso, Antonella, 2010. "Credit contagion in a network of firms with spatial interaction," European Journal of Operational Research, Elsevier, vol. 205(2), pages 459-468, September.
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-12-01 (All new papers)
- NEP-NET-2008-12-01 (Network Economics)
- NEP-RMG-2008-12-01 (Risk Management)
- NEP-URE-2008-12-01 (Urban & Real Estate Economics)
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