# An Agent-based Model of Contagion in Financial Networks

## TL;DR

This paper presents an agent-based model to simulate how leverage via repurchase agreements can propagate and amplify financial shocks within financial networks, providing insights into systemic risk during crises.

## Contribution

It introduces a novel agent-based framework specifically modeling leverage and contagion in repo and interbank markets, inspired by the 2007-08 financial crisis.

## Key findings

- Model captures contagion dynamics during financial shocks
- Reveals how leverage amplifies systemic risk
- Simulates crisis propagation in financial networks

## Abstract

This work develops an agent-based model for the study of how the leverage through the use of repurchase agreements can function as a mechanism for the propagation and amplification of financial shocks in a financial system. Based on the analysis of financial intermediaries in the repo and interbank lending markets during the 2007-08 financial crisis we develop a model that can be used to simulate the dynamics of financial contagion.