Fire-sale channels,
portfolio overlap networks and the credit spread puzzle

Theory

This chain represents equation (3) of Wang, van Lelyveld, Schaumburg (2017)

Hover over any of the blocks to see how a shock sets off a chain of contagion. Each block represents a bank. Each column represents a round of contagion.

Settings

What does "emphasize" mean?
Usually the effect dies out quite fast so later rounds are barely visible. Enabling this option will artificially boost the visibility of the links.
What does "backtracing" mean?
Without backtracing the graph shows how the shock propagates through the system, starting from the selected bank. Backtracing changes the perspective and treats the selected bank as a bank further down the contagion process. The blue lines then tell us by which banks the selected bank was affected.
Dieter Wang, 16 Nov 2017

Chain of contagion Select a block!

Network representation