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Contagion in an interacting economy

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  • Pierre Paga
  • Reimer Kuhn

Abstract

We investigate the credit risk model defined in Hatchett & K\"{u}hn under more general assumptions, in particular using a general degree distribution for sparse graphs. Expanding upon earlier results, we show that the model is exactly solvable in the $N\rightarrow \infty$ limit and demonstrate that the exact solution is described by the message-passing approach outlined by Karrer and Newman, generalized to include heterogeneous agents and couplings. We provide comparisons with simulations of graph ensembles with power-law degree distributions.

Suggested Citation

  • Pierre Paga & Reimer Kuhn, 2014. "Contagion in an interacting economy," Papers 1409.2625, arXiv.org, revised Mar 2015.
    • Handle: RePEc:arx:papers:1409.2625
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    References listed on IDEAS

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