Propagation of balance-sheet or cash-flow insolvency across financial
institutions may be modeled as a cascade process on a network representing
their mutual exposures. We derive rigorous asymptotic results for the magnitude
of contagion in a large financial network and give an analytical expression for
the asymptotic fraction of defaults, in terms of network characteristics. Our
results extend previous studies on contagion in random graphs to inhomogeneous
directed graphs with a given degree sequence and arbitrary distribution of
weights.