Contagion in Financial Networks (Gai P., Kapadia S.)

Contagion in Banking Financial Crises Risk-taking and Risk Management Stability&Soundness

Abstract This paper develops an analytical model of contagion in financial networks with arbitrary structure. We explore how the probability and potential impact of contagion is influenced by aggregate and idiosyncratic shocks, changes in network structure, and asset market liquidity. Our findings suggest that financial systems exhibit a robust-yet-fragile tendency: while the probability of contagion may be low, the effects can be extremely widespread when problems occur. And we suggest why the resilience of the system in withstanding fairly large shocks prior to 2007 should not have been taken as a reliable guide to its future robustness.
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Libref/ Gai P., Kapadia S. (2010) “Contagion in Financial Networks”, Bank of England Working Paper № 383, pp. 1-36
© Программирование — Александр Красильников, 2008
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