Abstract
This paper analyzes two major channels of P2P lending risk contagion in China—direct risk contagion between platforms and indirect risk contagion with other financial organizations as the contagion medium. Based on this analysis, the current study constructs a complex network model of P2P lending risk contagion in China and performs dynamics analogue simulations in order to analyze general characteristics of direct risk contagion among China’s online P2P lending platforms. The assumed conditions are that other financial organizations act as the contagion medium, with variations in the risk contagion characteristics set under the condition of significant information asymmetry in Internet lending. It is indicated that, compared to direct risk contagion among platforms, both financial organizations acting as the contagion medium and information asymmetry magnify the effect of risk contagion. It is also found that the superposition of media effects and information asymmetry is more likely to magnify the risk contagion effect.
Highlights
Based on Internet technology, P2P lending realizes information exchange, resource sharing, and capital flow among individuals
Considering the current developmental conditions of China’s network lending market, this study found that when the network model is constructed, the initial number of nodes is four
At the same time, based on the characteristics of China’s network lending market, the paper analyzes the impact that the risk intermediate vector and contagion lag have on network lending risk contagion as a whole
Summary
Based on Internet technology, P2P lending realizes information exchange, resource sharing, and capital flow among individuals. Given that many small-scale institutions with similar businesses may get in trouble at the same time or take similar behavior to the impact, this may trigger a collective importance, initiating systemic risks [1] For this reason, the current study only discusses circumstances of risk contagion among P2P lending platforms and other financial institutions. Acquisition of real and reliable data is a difficult job In response to these challenges, the current study aims to build a complex network model of P2P lending risk contagion, analyze the process of risk contagion, and reveal the mechanism of risk contagion. By combining the characteristics of P2P lending risk contagion, this study analyzes general features of the risk contagion of P2P lending platforms, and, based on this, it considers changes that may occur in the dynamics of risk contagion when other financial institutions, such as banks, small loan companies, security agencies, group company, or securities institutions, act as vectors and when asymmetric information exists
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