Abstract:

This paper studies the contagion risk in the payment system based on network model. Using current research result for reference, we describe the financial contagion through delay-differential equation and get the analytical solution with the help of renewal process. Then we analyze the contagion risk in different time-delay parameters based on the analytical solution. The results show that contagion risk significantly increases as time passed. Time-delay parameter also has a very strong effect on the contagion risk. Then we present related suggestions and policy implications which may improve the construction of China national automatic payment system and prudent macro-economic management both in theory and practice.

Key words: payment system, systemic risk, complex network