This contribution studies the effects of credit contagion on the credit risk of a portfolio of bank loans. To this aim we introduce a model that takes into account the counterparty risk in a network of interdependent firms that describes the presence of business relations among different ¯firms. The location of the ¯rms is simulated with probabilities computed using an entropy spatial interaction model. By means of a wide simulation analysis we use the model proposed to study the effects of default contagion on the loss distribution of a portfolio.

A credit contagion model for loan portfolios in a network of firms with spatial interaction

BARRO, Diana;BASSO, Antonella
2006

Abstract

This contribution studies the effects of credit contagion on the credit risk of a portfolio of bank loans. To this aim we introduce a model that takes into account the counterparty risk in a network of interdependent firms that describes the presence of business relations among different ¯firms. The location of the ¯rms is simulated with probabilities computed using an entropy spatial interaction model. By means of a wide simulation analysis we use the model proposed to study the effects of default contagion on the loss distribution of a portfolio.
Working paper 143/2006
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10278/35974
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