Physics – Condensed Matter – Statistical Mechanics
Scientific paper
2001-09-06
Physica A 299 (1-2) 198-204 Oct 1 2001
Physics
Condensed Matter
Statistical Mechanics
8 pages, 6 Encapsulated Postscript figures, to be published in Physica A (2001)
Scientific paper
10.1016/S0378-4371(01)00296-5
Interbank deposits (loans and credits) are quite common in banking system all over the world. Such interbank co-operation is profitable for banks but it can also lead to collective financial failures. In this paper we introduce a new model of directed percolation as a simple representation for contagion process and mass bankruptcies in banking systems. Directed connections that are randomly distributed between junctions of bank lattice simulate flows of money in our model. Critical values of a mean density of interbank connections as well as static and dynamic scaling laws for the statistic of avalange bankruptcies are found. Results of computer simulations for the universal profile of bankruptcies spreading are in a qualitative agreement with the third wave of bank suspensions during The Great Depression in the USA.
Aleksiejuk Agata
Holyst Janusz A.
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