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Podium
On-line version ISSN 2588-0969Print version ISSN 1390-5473
Abstract
NEGRETE ZAMBRANO, Valeria L. and ROMERO ALEMAN, Pedro P.. Study of Contagion in Financial Networks. Podium [online]. 2017, n.32, pp.31-43. ISSN 2588-0969. https://doi.org/10.31095/podium.2017.32.3.
The purpose of this article was to study the formation of financial networks and determine idiosyncratic shocks in case of contagion, based on the application of Gai and Kapadia, and Acemoglu, Ozdaglar and Tahbaz-Salehi models. The theory explained the operation of the network and how the connection of interbank assets and liabilities is defined between them. The studies concluded that the amount of loans issued by a bank should not exceed the assets it owns, because if this happens, the system will be exposed to a cascade of defaults. In addition, contagion would depend on the size of sensitive groups within the financial network, the degree of vulnerability of each bank, and how they are connected to each other.
Keywords : financial network; contagion; systematic risk; network models; financial crisis.