an entropy model of credit risk contagion in the crt market
;Tingqiang Chen;Ying Chen;Xindan Li;Jining Wang
Journal of the American Heart Association2015Vol. 2015pp. -
154
chen2015discretean
Abstract
This paper reports the effect of the change in the credit status of debtors on investors as a result of the banks’ transferring of credit risk to investors in the credit risk transfer (CRT) market. Thus, an entropy spatial model is introduced, in which the spatial distance and nonlinear coupling between the banks and the investors, the transfer ability of credit risk of banks, and investor appetite for risk in the CRT network are considered. The contagion effects of the credit default of debtor on the default rates of investors in the CRT market are investigated using numerical simulation and sensitivity analysis.