A lifeline for the weakest link? financial contagion and network design

Yaron Leitner

doi:10.1109/emr.2003.1207065

A lifeline for the weakest link? financial contagion and network design

Yaron Leitner

Research output: Contribution to journal › Article › peer-review

Abstract

The ways in which firms are linked to one another may trigger contagion is shown. As such, the issue of an optimal design for networks is discussed. The negatives effects of contagion may lead to believe that one should limit exposure between financial institutions. It is observed, however, that in some cases such exposure may be good for everyone despite and because of the threat of contagion: The threat of contagion enhances commitment.

Original language	English
Pages (from-to)	61-67
Number of pages	7
Journal	IEEE Engineering Management Review
Volume	31
Issue number	2
DOIs	https://doi.org/10.1109/emr.2003.1207065
State	Published - 2003

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10.1109/emr.2003.1207065

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abstract = "The ways in which firms are linked to one another may trigger contagion is shown. As such, the issue of an optimal design for networks is discussed. The negatives effects of contagion may lead to believe that one should limit exposure between financial institutions. It is observed, however, that in some cases such exposure may be good for everyone despite and because of the threat of contagion: The threat of contagion enhances commitment.",

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AB - The ways in which firms are linked to one another may trigger contagion is shown. As such, the issue of an optimal design for networks is discussed. The negatives effects of contagion may lead to believe that one should limit exposure between financial institutions. It is observed, however, that in some cases such exposure may be good for everyone despite and because of the threat of contagion: The threat of contagion enhances commitment.

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A lifeline for the weakest link? financial contagion and network design

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