Bundesbank paper models ‘information contagion’
Working paper tests model using data on Canadian banking sector
A discussion paper published by Deutsche Bundesbank develops an operational model of "information contagion", where bad news about one institution leads to a more widespread loss of confidence. They show how it can be integrated into a "top-down, stress-testing framework" to quantify systemic risk.
In Capturing information contagion in a stress-testing framework, Kartik Anand, Céline Gauthier, Prasanna Gai and Moez Souissi say the model's key transmission mechanism is the interaction between the
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