Credit contagion and credit risk
Physics and Society
2008-12-02 v1 Risk Management
Abstract
We study a simple, solvable model that allows us to investigate effects of credit contagion on the default probability of individual firms, in both portfolios of firms and on an economy wide scale. While the effect of interactions may be small in typical (most probable) scenarios they are magnified, due to feedback, by situations of economic stress, which in turn leads to fatter tails in loss distributions of large loan portfolios.
Keywords
Cite
@article{arxiv.physics/0609164,
title = {Credit contagion and credit risk},
author = {J. P. L. Hatchett and R. Kuehn},
journal= {arXiv preprint arXiv:physics/0609164},
year = {2008}
}
Comments
11 pages, 3 figures