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Credit contagion in a network of firms with spatial interaction

Author

Listed:
  • Diana Barro

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

  • Antonella Basso

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

Abstract
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.

Suggested Citation

  • Diana Barro & Antonella Basso, 2008. "Credit contagion in a network of firms with spatial interaction," Working Papers 186, Department of Applied Mathematics, Università Ca' Foscari Venezia.
    • Handle: RePEc:vnm:wpaper:186
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    credit risk; bank loan portfolios; contagion models; entropy spatial models;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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