Copyright © 2012 Ting-Qiang Chen and Jian-Min He. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

A network model of credit risk contagion is presented, in which the effect of behaviors of credit risk holders and the financial market regulators and the network structure are considered. By introducing the stochastic dominance theory, we discussed, respectively, the effect mechanisms of the degree of individual relationship, individual attitude to credit risk contagion, the individual ability to resist credit risk contagion, the monitoring strength of the financial market regulators, and the network structure on credit risk contagion. Then some derived and proofed propositions were verified through numerical simulations.