iConViz: Interactive Visual Exploration of the Default Contagion Risk of Networked-Guarantee Loans

TL;DR

iConVis is an interactive visual analysis tool that helps financial authorities assess and manage default contagion risks in complex networked guarantee loan systems using a novel contagion effect metric.

Contribution

The paper introduces iConVis, a new visual analytics system with a contagion effect metric for analyzing systemic default risks in guarantee networks, enhancing risk management practices.

Findings

Experts found iConVis effective for analyzing contagion risks.

The contagion effect metric accurately quantifies default spread.

System improves over traditional ad hoc analysis methods.

Abstract

Groups of enterprises can serve as guarantees for one another and form complex networks when obtaining loans from commercial banks. During economic slowdowns, corporate default may spread like a virus and lead to large-scale defaults or even systemic financial crises. To help financial regulatory authorities and banks manage the risk associated with networked loans, we identified the default contagion risk, a pivotal issue in developing preventive measures, and established iConVis, an interactive visual analysis tool that facilitates the closed-loop analysis process. A novel financial metric, the contagion effect, was formulated to quantify the infectious consequences of guarantee chains in this type of network. Based on this metric, we designed and implement a series of novel and coordinated views that address the analysis of financial problems. Experts evaluated the system using real-world financial data. The proposed approach grants practitioners the ability to avoid previous ad hoc analysis methodologies and extend coverage of the conventional Capital Accord to the banking industry.