Title: Network models to assess credit risk contagion
Authors: Paolo Giudici - University of Pavia (Italy)
Arianna Agosto - University of Pavia (Italy) [presenting]
Daniel Felix Ahelegbey - University of Pavia (Italy)
Abstract: A count-based network model is proposed to investigate credit risk contagion. Estimating the network upon autoregressive processes we take into account both contemporaneous and lagged contagion effects between economic sectors. The model is effectively applied to a database containing time series of quarterly default counts in the Italian banking system. Our empirical application reveals evidence of high inter-sector vulnerability before and after the global financial crisis. We also consider the contribution of exogenous variables to explain the risk propagation channels.