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Analysis of the Contagion of Financial Risks in Complex Financial Networks

In: Proceedings of the 2023 International Conference on Finance, Trade and Business Management (FTBM 2023)

Author

Listed:
  • Min Liu

    (Jinan University)

  • Rongrong Xu

    (Jinan University)

Abstract

Analysis for the area of complex networks and their applications to economics and finance is an important area of current research in finance. This paper carries out mathematical modelling of the financial system, aiming to study the contagion process of financial risk and to investigate the contagion effect of financial risk. It also analyses the subjects and paths in the process of financial risk contagion. Firstly, the paper abstracts the financial system as a financial network with scale-free nature. Based on the traditional SIRS virus contagion dynamics model, the financial risk contagion model (SIRD model) is built by adding bankruptcy nodes and bankruptcy rate parameters, which is in conjunction with the characteristics of the actual financial system. Then simulations are carried out to analyze the effects of risk propagation rate, recovery rate, resistance failure rate and bankruptcy rate on the steady state results in the model respectively. Finally, based on the simulation results, the characteristics of financial risk contagion under different scenarios are discussed, and the nature of financial risk contagion is summarized and suggestions are given.

Suggested Citation

  • Min Liu & Rongrong Xu, 2023. "Analysis of the Contagion of Financial Risks in Complex Financial Networks," Advances in Economics, Business and Management Research, in: Amalendu Bhunia & Rubi Binti Ahmad & Yifeng Zhu (ed.), Proceedings of the 2023 International Conference on Finance, Trade and Business Management (FTBM 2023), pages 507-519, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-298-9_55
    DOI: 10.2991/978-94-6463-298-9_55
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