ContagionGraphs a Tool for Network-Based Models of Financial Contagion

31 Pages Posted: 28 Nov 2020

See all articles by Daniel Blochinger

Daniel Blochinger

Ulm University - Institute of Economics

Date Written: October 13, 2020

Abstract

Financial contagion is explored in a large and growing number of network-based models with a high variety of assumptions on network geometry, bank balance sheets, loan settlement, etc. In this paper, we present “ContagionGraphs”, a tool for researches to explore the seemingly endless possibilities in network-based models of financial contagion. We showcase its abilities by reproducing and extending on hallmark papers in the field such as Allen and Gale (2000), Nier et al. (2007) and Acemoglu et al. (2015). On top of the predominant analysis of average default ratios in average node degrees, we show that the net credit position of the shocked bank is a strong predictor of network stability and that equity and liquidity are substitutes for interbank network stability.

Keywords: Financial Contagion, Network Based Models, Interbank Markets, Liquidity, Equity

JEL Classification: G01, G17, G21

Suggested Citation

Blochinger, Daniel, ContagionGraphs a Tool for Network-Based Models of Financial Contagion (October 13, 2020). Available at SSRN: https://ssrn.com/abstract=3710697 or http://dx.doi.org/10.2139/ssrn.3710697

Daniel Blochinger (Contact Author)

Ulm University - Institute of Economics ( email )

Helmholtzstraße 16
Ulm, 89081
Germany

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