Credit Risk Diffusion in Supply Chain Finance: A Complex Networks Perspective

Abstract

The diffusion of credit risk in a supply chain finance network can cause serious consequences. Using the “1 + M + N” complex network model with BA scale-free characteristics, this paper studies the credit risk diffusion in a supply chain finance network, where the credit risk diffusion process is simulated by the SIS epidemic model. We examine the impacts of various key factors, including the general financing ratio, cure time, network structure, and network scale on the credit risk diffusion process. It is found that credit risk diffusion rarely occurs in a network with a low average degree. When the average degree of the network increases, the occurrence of the credit risk diffusion becomes more frequent. Besides, the degree of the initially infected nodes with credit risk does not affect the density of the infected nodes in the steady state, while a higher degree of the cure nodes helps restrain the diffusion of credit risk in the supply chain finance network. Finally, the simulation result based on the supply chain finance network with a core node indicates that the diffusion of the credit risk diffusion in sparse supply chain finance networks with low average degrees is unstable. The results provide better understandings on the credit risk diffusion in supply chain finance networks.

Literature Review and Content Analysis: Internet Finance, Green Finance, and Sustainability

“…Although Internet finance has brought a broader and diversified perspective, its risks can be overlooked. Among them, the spread of supply chain financial credit risk in the network will bring about serious consequences to the economy [7]. Nier (2007) studied the banking network and found that the network structure would affect the spread of credit risk [8].…”

Nonlinear Dynamics Characteristic of Risk Contagion in Financial Market Based on Agent Modeling and Complex Network

“…Complex network theory originated from the study on Seven Bridges of Königsberg [58]. Along with the increasing development of complex network theory, more and more scholars tried to apply this theory to financial markets and studied the inner mechanism of risk contagion [59][60][61]. Taking stock market as an example, a stock can be abstracted as an agent in a complex network, and the correlation coefficient between two stocks can be seen as an edge in this network.…”

Identifying and Predicting the Credit Risk of Small and Medium-Sized Enterprises in Sustainable Supply Chain Finance: Evidence from China

“…This business model not only effectively solves the capital shortage problem of SMEs but also expands the customer base of SMEs for FIs. However, due to lack of pledged assets and CEs credit guarantee in case of SCF, FIs face complex risks, the most significant of which is the credit risk [15]. This study defines credit risk as the possibility that borrowing enterprises cannot or are unwilling to repay the principal and interest according to the financing contract [16].…”