Download or read book Cross Border Interbank Contagion Risk Analysis written by Roman Matousek and published by Cambridge University Press. This book was released on 2020-07-30 with total page 101 pages. Available in PDF, EPUB and Kindle. Book excerpt: This Element provides a detailed overview of the structural changes in the Asia-Pacific region from the early 2000s onwards. It reviews the most relevant literature on this important topic. The following two research areas are explored: first, by deploying visual network analysis (VNA), we analyse cross-border interbank claims and liabilities of the individual countries located in the Asia-Pacific region. Such an analysis evaluates interbank exposures to systematically important banks within the specific market. The important advantage of VNA is that it allows us to examine the 'hierarchical' cross-country interbank contagion risk that seems to have been neglected in similar studies. Secondly, we evaluate the contagion risk to the individual countries spreading from the financial centres in Hong Kong, Singapore, Tokyo, New York and London. The analysis unveils links and statistical factors that could be used as a key tool for detecting the potential triggers of systemic risk.
Download or read book The Effect of the Interbank Network Structure on Contagion and Common Shocks written by Co-Pierre Georg and published by . This book was released on 2016 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper proposes a dynamic multi-agent model of a banking system with central bank. Banks optimize a portfolio of risky investments and riskless excess reserves according to their risk, return, and liquidity preferences. They are linked via interbank loans and face stochastic deposit supply. Evidence is provided that the central bank stabilizes interbank markets in the short-run only. Comparing different interbank network structures, it is shown that money-center networks are more stable than random networks. Systemic risk via contagion is compared to common shocks and it is shown that both forms of systemic risk require different optimal policy responses.
Download or read book Filling in the Blanks written by Kartik Anand and published by . This book was released on with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: The network pattern of financial linkages is important in many areas of banking and finance. Yet bilateral linkages are often unobserved, and maximum entropy serves as the leading method for estimating counterparty exposures. This paper proposes an efficient alternative that combines information-theoretic arguments with economic incentives to produce more realistic interbank networks that preserve important characteristics of the original interbank market. The method loads the most probable links with the largest exposures consistent with the total lending and borrowing of each bank, yielding networks with minimum density. When used in a stress-testing context, the minimum density solution overestimates contagion, whereas maximum entropy underestimates it. Using the two benchmarks side by side defines a useful range that bounds the cost of systemic stress present in the true interbank network when counterparty exposures are unknown.
Download or read book CoMap Mapping Contagion in the Euro Area Banking Sector written by Mehmet Ziya Gorpe and published by International Monetary Fund. This book was released on 2019-05-10 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a novel approach to investigate and model the network of euro area banks’ large exposures within the global banking system. Drawing on a unique dataset, the paper documents the degree of interconnectedness and systemic risk of the euro area banking system based on bilateral linkages. We develop a Contagion Mapping model fully calibrated with bank-level data to study the contagion potential of an exogenous shock via credit and funding risks. We find that tipping points shifting the euro area banking system from a less vulnerable state to a highly vulnerable state are a non-linear function of the combination of network structures and bank-specific characteristics.
Download or read book Computational Science ICCS 2004 written by Marian Bubak and published by Springer Science & Business Media. This book was released on 2004-05-26 with total page 1376 pages. Available in PDF, EPUB and Kindle. Book excerpt: The International Conference on Computational Science (ICCS 2004) held in Krak ́ ow, Poland, June 6–9, 2004, was a follow-up to the highly successful ICCS 2003 held at two locations, in Melbourne, Australia and St. Petersburg, Russia; ICCS 2002 in Amsterdam, The Netherlands; and ICCS 2001 in San Francisco, USA. As computational science is still evolving in its quest for subjects of inves- gation and e?cient methods, ICCS 2004 was devised as a forum for scientists from mathematics and computer science, as the basic computing disciplines and application areas, interested in advanced computational methods for physics, chemistry, life sciences, engineering, arts and humanities, as well as computer system vendors and software developers. The main objective of this conference was to discuss problems and solutions in all areas, to identify new issues, to shape future directions of research, and to help users apply various advanced computational techniques. The event harvested recent developments in com- tationalgridsandnextgenerationcomputingsystems,tools,advancednumerical methods, data-driven systems, and novel application ?elds, such as complex - stems, ?nance, econo-physics and population evolution.
Download or read book Assessing Financial Contagion in the Interbank Market written by Paolo Emilio Mistrulli and published by . This book was released on 2007 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Using Counterfactual Simulations to Assess the Danger of Contagion in Interbank Markets written by Christian Upper and published by . This book was released on 2007 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: Researchers at central banks increasingly turn to counterfactual simulations to estimate the danger of contagion owing to exposures in the interbank loan market. The present paper summarises the findings of such simulations, provides a critical assessment of the modelling assumptions on which they are based, and discusses their use in financial stability analysis. On the whole, such simulations suggest that contagious defaults are unlikely, but cannot be fully ruled out, at least in some countries. If contagion does take place, then it could lead to the breakdown of a substantial fraction of the banking system, thus imposing high costs to society. However, when interpreting these results, one has to bear in mind the potential bias caused by the very strong assumptions underlying the simulations. While robustness tests indicate that the models might be able to correctly predict whether or not contagion could be an issue and, possibly, also identify critical institutions, they are less suited for stress testing or for the analysis of policy options in crises, primarily due to their lack of behavioural foundations. Going forward, more work is needed on how to attach probabilities to the individual scenarios and on the microfoundations of the models.
Download or read book The Effect of the Interbank Network Structure on Contagion and Common Shocks written by Co-Pierre Georg and published by . This book was released on 2011 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Interbank Exposures written by Craig H. Furfine and published by . This book was released on 1999 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Estimating Bilateral Exposures in the German Interbank Market written by Christian Upper and published by . This book was released on 2016 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: Credit risk associated with interbank lending may lead to domino effects, where the failureKreditrisiken aus Interbankbeziehungen können zu Dominoeffekten führen indem der.
Download or read book Interbank Contagion and Resolution Procedures written by Edoardo Gaffeo and published by . This book was released on 2013 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a network model of a stylized banking system in which banks are connected to one another through interbank claims, which allows us to study the diffusion of default avalanches triggered by an exogenous shock under a number of different assumptions on the degree of interconnectedness, level of capitalization, liquidity buffers, the size of the interbank market and fire-sales. We expand upon the existing literature by embedding two alternative resolution mechanisms. First, liquidations triggered by either illiquidity or insolvency-related distress implying asset sales and compensation of creditors. Second, a bail-in mechanism avoiding bank closure by forcing a recapitalization provided by bank creditors. Our model speaks to how contagion dynamics unravel via illiquidity-driven defaults in the first case and higher-order losses in the latter one. Within this framework, we show how counter-party liquidity risk externality can be resolved and put forward a macro-criterion to assess the adequacy of the liquidity ratio introduced with Basel III.
Download or read book The Interbank Market Contagion Effects and International Financial Crises written by Anthony Saunders and published by . This book was released on 1986 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Contagion in the Interbank Market and Its Determinants written by Christoph Memmel and published by . This book was released on 2016 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Carrying out interbank contagion simulations for the German banking sector for the period from the first quarter of 2008 to the second quarter of 2011, we obtain the following results: (i) The system becomes less vulnerable to direct interbank contagion over time. (ii) The loss distribution for each point in time can be condensed into one indicator, the expected number of failures, without much loss of information. (iii) Important determinants of this indicator are the banks' capital, their interbank lending in the system, the loss given default and how equal banks spread their claims among other banks.
Download or read book Assessing Interbank Contagion Using Simulated Networks written by Grzegorz Hałaj and published by . This book was released on 2013 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This paper presents a new approach to randomly generate interbank networks while overcoming shortcomings in the availability of bank-by-bank bilateral exposures. Our model can be used to simulate and assess interbank contagion effects on banking sector soundness and resilience. We find a strongly non-linear pattern across the distribution of simulated networks, whereby only for a small percentage of networks the impact of interbank contagion will substantially reduce average solvency of the system. In the vast majority of the simulated networks the system-wide contagion effects are largely negligible. The approach furthermore enables to form a view about the most systemic banks in the system in terms of the banks whose failure would have the most detrimental contagion effects on the system as a whole. Finally, as the simulation of the network structures is computationally very costly, we also propose a simplified measure - a so-called Systemic Probability Index (SPI) - that also captures the likelihood of contagion from the failure of a given bank to honour its interbank payment obligations but at the same time is less costly to compute. We find that the SPI is broadly consistent with the results from the simulated network structures."--Abstract.
Download or read book Insights in European Interbank Network Contagion written by Dionisis Philippas and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Purpose - We analyse the importance of regulatory requirements and interbank connections to financial stability by looking at a large number of European and UK banks.Design/Methodology - We model interbank contagion using insights from the Susceptible Infected Recovered model. We construct scale-free networks with preferential attachment and growth, applying simulated interbank data to capture the size and scale of connections in the network. We proceed to shock these networks per country and we perform Monte Carlo simulations to calculate mean total losses and duration of infection. Finally, we examine the regulatory requirement effects of contagion in terms of Core Tier 1 Capital Ratios for affected banking systems.Findings - We find that shocks in smaller banking systems may cause smaller overall losses but tend to persist longer, leading to important policy implications for crisis containment.Originality - We infer the interbank domestic and cross border exposures of banks employing the RAS algorithm. We use an extend sample of 169 European banks, that also captures effects on the UK as well as the Eurozone interbank market. Finally, we provide evidence of the effects of contagion on each bank, allowing for bank heterogeneity by comparing the bank's relative financial strength to the strength of the contagion that is modelled by the number and the volume of bilateral connections.
Download or read book Interbank Contagion written by Steve Y. Yang and published by . This book was released on 2017 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: The potential impact of interconnected financial institutions on interbank financial systems is a financial stability concern for central banks and regulators. A number of algorithms/methods have been developed to extrapolate latent interbank risk exposures. However, most use highly stylized network models and reconstruction methods with global optimality lending allocation approaches such as maximizing entropy or minimizing costs. This paper argues that U.S. bank lending and borrowing decisions are largely suboptimal and performance-driven. We present an agent-based model to endogenously reconstruct interbank networks based on 6,600 banks' decision rules and behaviors reflected in quarterly balance sheets. The model formulation reproduces dynamics similar to those of the 2007-09 financial crisis and shows how bank losses and failures arise from network contagion and lending market illiquidity. When calibrated to post-crisis data from 2011-14, the model shows the banking system has reduced its likelihood of bank failures through network contagion and illiquidity, given a similar stress scenario.
Download or read book Interbank Contagion in the Dutch Banking Sector written by Iman van Lelyveld and published by . This book was released on 2011 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate interlinkages and contagion risks in the Dutch interbank market. Based on several data sources, including the answers of banks to a questionnaire, we estimate the exposures in the interbank market at bank level. Next, we perform a scenario analysis to measure contagion risks. We find that the bankruptcy of one of the large banks will put a considerable burden on the other banks, but will not lead to a complete collapse of the interbank market. The contagion effects of the failure of a smaller bank are limited. The exposures to foreign counterparties are large and warrant further research.
