Guarantee network model and risk contagion

In this paper, we construct a dynamic guarantee network model. Based on the constructed model, the dynamic evolution of risk contagion is researched by means of simulation methods. The risk contagion research is carried out from three aspects:guarantee mechanism, partner selection mechanism, and production parameter. The research shows that: (1) Firm size distribution takes on a power-law tail. (2) Guarantee network provides a channel for risk contagion and aggravates risk contagion among firms. (3) The type of partner selection mechanism has an impact on risk contagion. Risk cognation in the net worth mechanism is more serious in comparison to the random mechanism. (4) Risk contagion among firms is the increasing function of the production parameter φ.