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Contagion in financial networks

Glasserman, Paul and Young, H. Peyton (2016) Contagion in financial networks. Journal of Economic Literature, 54 (3). pp. 779-831. ISSN 0022-0515

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Identification Number: 10.1257/jel.20151228

Abstract

The recent financial crisis has prompted much new research on the interconnectedness of the modern financial system and the extent to which it contributes to systemic fragility. Network connections diversify firms' risk exposures, but they also create channels through which shocks can spread by contagion. We review the extensive literature on this issue, with the focus on how network structure interacts with other key variables such as leverage, size, common exposures, and short-term funding. We discuss various metrics that have been proposed for evaluating the susceptibility of the system to contagion and suggest directions for future research.

Item Type: Article
Official URL: https://www.aeaweb.org/journals/jel
Additional Information: © 2016 American Economic Association
Divisions: Mathematics
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
JEL classification: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D85 - Network Formation and Analysis: Theory
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
G - Financial Economics > G2 - Financial Institutions and Services > G22 - Insurance; Insurance Companies
G - Financial Economics > G2 - Financial Institutions and Services > G23 - Pension Funds; Other Private Financial Institutions
G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation
Sets: Departments > Mathematics
Date Deposited: 20 Dec 2016 13:12
Last Modified: 20 Sep 2019 02:16
URI: http://eprints.lse.ac.uk/id/eprint/68681

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