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Credit contagion in a network of firms with spatial interaction

  • Diana Barro

    ()

    (Department of Applied Mathematics and SSAV, University of Venice)

  • Antonella Basso

    ()

    (Department of Applied Mathematics and SSAV, University of Venice)

In 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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File URL: http://virgo.unive.it/wpideas/storage/2008wp186.pdf
File Function: First version, 2008
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Paper provided by Department of Applied Mathematics, Università Ca' Foscari Venezia in its series Working Papers with number 186.

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Length: 18 pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:vnm:wpaper:186
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