Publication

This paper proposes a new approach to the analysis of direct contagion in financial networks. The author models the effects of shocks to the financial system and investigates the relationship between the structure of a financial network, the pattern of obligations of actors operating within it, as well as its exposure to contagion. The author concludes that the exposure of a generic network, both in terms of contagion thresholds and the number of defaults induced by a shock, grows with the ratio between internal and external debts.