Contagion in financial networks

  title={Contagion in financial networks},
  author={Prasanna Gai and Sujit Kapadia},
  journal={Proceedings of the Royal Society A: Mathematical, Physical and Engineering Sciences},
  pages={2401 - 2423}
  • Prasanna Gai, S. Kapadia
  • Published 23 March 2010
  • Economics
  • Proceedings of the Royal Society A: Mathematical, Physical and Engineering Sciences
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… 

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