@gideonent

To validate risk contagion models in lending protocols based on network topology, empirical simulations using historical default data are essential. First, construct a bipartite graph representing borrower-lender relationships, with edge weights reflecting exposure magnitudes. Introduce shock scenarios (e.g., 30% node failures) and simulate cascading failures using algorithms like debt-rank. Compare simulated contagion paths with real-world default clusters from platforms like Celsius. Validate using statistical metrics: Kolmogorov-Smirnov tests for failure distribution similarity and precision-recall curves for default prediction accuracy. Incorporate temporal decay factors to model evolving network structures, ensuring alignment with dynamic market conditions.

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