  Using particle system methodologies we study the propagation of financial
distress in a network of firms facing credit risk. We investigate the
phenomenon of a credit crisis and quantify the losses that a bank may suffer in
a large credit portfolio. Applying a large deviation principle we compute the
limiting distributions of the system and determine the time evolution of the
credit quality indicators of the firms, deriving moreover the dynamics of a
global financial health indicator. We finally describe a suitable version of
the "Central Limit Theorem" useful to study large portfolio losses. Simulation
results are provided as well as applications to portfolio loss distribution
analysis.
