IDEAS home Printed from https://ideas.repec.org/a/eee/matcom/v245y2026icp592-609.html

Risk contagion effects and stability analysis of complex financial systems with multilayer networks

Author

Listed:
  • Ding, Yi
  • Yan, Chun
  • Liu, Wei
  • Liu, Xinhong
  • Liu, Jiahui

Abstract

The financial system is a complex system with multiple interconnected channels. In this paper, we propose a framework for default and distress contagion based on a multilayer network that allows risk to be transmitted before the institutional default. To this end, we first propose a multilayer network financial system based on interbank lending, cross-holdings and overlapping portfolios. The default contagion mechanism under the interaction of the three connections is investigated in this system and a valuation function for default contagion is given. We then introduce the concept of capital buffers, allowing risk contagion prior to default by constructing an asset valuation function during crises. Finally, we validate the influence of financial network characteristics on risk contagion and systemic stability through numerical simulations. This study can provide a theoretical basis for understanding the contagion of financial system risk in real-world financial systems.

Suggested Citation

  • Ding, Yi & Yan, Chun & Liu, Wei & Liu, Xinhong & Liu, Jiahui, 2026. "Risk contagion effects and stability analysis of complex financial systems with multilayer networks," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 245(C), pages 592-609.
    • Handle: RePEc:eee:matcom:v:245:y:2026:i:c:p:592-609
    DOI: 10.1016/j.matcom.2026.02.014
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378475426000601
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.matcom.2026.02.014?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:matcom:v:245:y:2026:i:c:p:592-609. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/mathematics-and-computers-in-simulation/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.