Credit contagion refers to the propagation of economic distress from one firm or sovereign government to another. In this paper we model credit contagion phenomena and study the fluctuation of aggregate credit losses on large portfolios of financial positions. The joint dynamics of firms' credit...

We bring to light a benefit of trade credit relationships in which large investment-grade firms borrow from their smaller suppliers despite the ability to secure less expensive financing elsewhere. The use of trade credit allows a firm, which is wary of a supply disruption, to indirectly acquire...