Research Article
Incorporating Contagion in Portfolio Credit Risk Models Using Network Theory
Figure 3
Illustration of the CountryRank parameter using a hypothetical network. The subfigures (a)–(e) show the propagation of stress in the network starting from the sovereign node to corporate nodes. At each step, the stress spreads to a node using the path with the maximum weight from the sovereign node.
(a) Sovereign node in stress |
(b) Stress propagates to node |
(c) Stress propagates to node |
(d) Stress propagates to node |
(e) Stress propagates to node |