Modeling the spread of risks in the financial network

Subject Areas : Financial engineering

naser haghi seyfedin ¹ , Nader Rezaei ² , Rasoul ABDI ³ , yagob agdam mazrae ⁴

1 - Department of Accounting, Bonab Branch, Islamic Azad University, Bonab, Iran.
2 - Department of Accounting, Bonab Branch, Islamic Azad University, Bonab, Iran.
3 - Department of Accounting, Bonab Branch, Islamic Azad University, Bonab, Iran.
4 - Department of Accounting, sofian branch, islamic azad university, sofian , iran

Received: 2021-03-28 Accepted : 2021-09-03 Published : 2021-12-22

Keywords: Financial network, Risk transmission, financial system heterogeneity, financial system stability,

Abstract :

The purpose of this study is to model the spread of risks in the financial network. In this study, using MATLAB software, the interdependencies of claims and liabilities of companies listed on the Tehran Stock Exchange as a financial network are modeled and the spread of default in it is simulated. This research is among the applied researches. The statistical population of the studied information is 407 companies listed on the Tehran Stock Exchange in the period of 1393-1397. The results of this study emphasize the role of "contagious links" and show that the organizations that have the greatest impact on network instability have more contact with network members or a large proportion of contagious links. In this study, we consider a directional graph with a sequence of degrees and an optional weight distribution. Asymptotic results show that there is good agreement with simulation for networks of realistic size. In this study, we consider a directional graph with a sequence of degrees and an optional weight distribution. Asymptotic results show that there is good agreement with simulation for networks of realistic size.