We consider a network of firms linked by business relationships and a financial institution holding a large portfolio with positions issued by the firms. As the firms are linked among each others, a financial distress in one of these firms can spread to the others causing the so called credit contagion effect, the propagation of economic distress from one firm or sovereign government to another. We explain the idea of credit crisis, how this phenomenon depends on our model parameters and the consequences that the clustering of defaults have on the portfolio hold by a bank with positions issued by the firms. We estimate the fluctuation of aggregate credit losses for a bank holding large portfolios of financial positions through mathematical approaches and numerical simulations and we show some possible intuitions about the consistency of our model with real market data.
Credit Crises and large portfolio Losses
Schiavon, Giovanni
2020/2021
Abstract
We consider a network of firms linked by business relationships and a financial institution holding a large portfolio with positions issued by the firms. As the firms are linked among each others, a financial distress in one of these firms can spread to the others causing the so called credit contagion effect, the propagation of economic distress from one firm or sovereign government to another. We explain the idea of credit crisis, how this phenomenon depends on our model parameters and the consequences that the clustering of defaults have on the portfolio hold by a bank with positions issued by the firms. We estimate the fluctuation of aggregate credit losses for a bank holding large portfolios of financial positions through mathematical approaches and numerical simulations and we show some possible intuitions about the consistency of our model with real market data.File | Dimensione | Formato | |
---|---|---|---|
tesi_Schiavon.pdf
accesso aperto
Dimensione
1.25 MB
Formato
Adobe PDF
|
1.25 MB | Adobe PDF | Visualizza/Apri |
The text of this website © Università degli studi di Padova. Full Text are published under a non-exclusive license. Metadata are under a CC0 License
https://hdl.handle.net/20.500.12608/21916