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Contagion and loss redistribution in crypto asset markets

Author

Listed:
  • Schuler, Katrin
  • Nadler, Matthias
  • Schär, Fabian

Abstract

This paper addresses the growing concern of shock propagation in crypto asset markets. The integration of conventional financial institutions (CeFi) and decentralized financial protocols (DeFi) has introduced a set of complexities that are not adequately accounted for in current models. We build on the well-established framework by Eisenberg and Noe (2001) and propose a generalized extension that can be applied to mixed DeFi/CeFi networks. Our model serves as a tool for comprehending potential contagion channels and loss redistribution resulting from the non-recourse nature of DeFi loans.

Suggested Citation

  • Schuler, Katrin & Nadler, Matthias & Schär, Fabian, 2023. "Contagion and loss redistribution in crypto asset markets," Economics Letters, Elsevier, vol. 231(C).
    • Handle: RePEc:eee:ecolet:v:231:y:2023:i:c:s016517652300335x
    DOI: 10.1016/j.econlet.2023.111310
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    References listed on IDEAS

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    More about this item

    Keywords

    Crypto assets; Decentralized finance; Non-recourse loans; Shock propagation; Systemic risk;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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