Modeling the default correlation risk in the financial network based on the reduced model
Subject Areas : Journal of Investment Knowledge
naser haghi seyfedin
1
(Ph.D. Candidate. department of accounting
. bonab branch. islamic azad university.bonab . iran)
Rasoul ABDI
2
(Assistant Professor. Department of Accounting, Bonab Branch, Islamic Azad University, Bonab, Iran)
nader rezaei
3
(Accounting and Management, Islamic Azad University, Maragheh, Iran)
yagob aghdam mazrea
4
(assistant professor.department of accounting.sofyan branch.islamic azad university .sofyan.iran)
Keywords: reduced model, intervention policies, Default correlation risk, financial network,
Abstract :
The purpose of this study is to model the default risk correlation in the financial network based on the reduced model. In this study, we focus on the spread of default in the financial network and examine the effect of financial system heterogeneity on the stability of the financial system, and finally, by implementing intervention policies, we offer suggestions to reduce risks and rebuild the network. This research is among the applied researches. The statistical sample of the studied information is 407 companies listed on the Tehran Stock Exchange in the period of 1393-1398. In order to test the relationship between variables and the significance of the model, regression analysis and MATLAB software was used for modeling. Research findings show that the companies that have the most contact with network members will have the greatest impact on network instability. The results showed that the increase in the dispersion of interdependencies of receivables and liabilities, to the depth of 5 relationships in companies, has a negative effect on the stability of the financial system and the high variance of positions and the degree of financial epidemic by increasing both epidemic range and probability
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