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2011/09/16

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Heterogeneity, Correlations and Financial Contagion, SFI Working Papers
 









Excerpts: We consider a model of contagion in financial networks (…), and we
characterize the effect of a few features empirically observed in real networks
on the stability of the system. (…) A power law distribution of balance sheet
size is shown to induce an inefficient diversification that makes the system
more prone to contagion events. A targeted policy aimed at reinforcing the
stability of the biggest banks is shown to improve the stability of the system
in the regime of high average degree. Finally, disassortative mixing, such as
that observed in real banking networks, is shown to enhance the stability of the
system.
Source: Heterogeneity, Correlations and Financial Contagion[
http://www.santafe.edu/research/working-papers/abstract/acce9c73f978ba6558940d9568e9234a/
], Fabio Caccioli, Thomas A. Catanach, J. Doyne Farmer, DOI: SFI-WP 11-09-044,
SFI Working Papers

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